Gold price hovers around $2,690 as Fed cut reinforces safe-haven appeal

Gold prices held firm and posted gains of over 1% after the Federal Reserve (Fed) lowered interest rates by 25 basis points (bps), as expected. Yet, per the golden metal reaction, it seems that it was already priced. The XAU/USD trades at $2,692 after bouncing off a daily low of $2,643.

XAU/USD climbs to $2,692 as investors weigh Fed’s cautious outlook on inflation and economic expansion.

The statement highlights that Fed officials observed solid economic expansion, even though labor market conditions have softened. They remarked that inflation has moved closer to the Fed’s 2 percent target but remains somewhat elevated.

Fed policymakers also noted that the risks of meeting their dual mandate are “roughly balanced” but acknowledged uncertainty in the economic outlook. They will remain vigilant to risks on both sides of the mandate.

The FOMC will consider new data, the evolving outlook, and the balance of risks when making future decisions. The decision was unanimous, with Governor Michelle Bowman supporting the rate cut.

Concerning the balance sheet, Fed officials plan to continue reducing their holdings of Treasury, agency debt, and agency mortgage-backed securities.

Next would be the Fed Chair Jerome Powell's press conference at 14:00 ET.

XAU/USD Price Chart – Daily

Gold rebounded at around the 50-day Simple Moving Average (SMA) at $2,639 and aimed towards the $2,700, but buyers lacked the strength of push prices higher. The first key resistance area for bulls would be $2,700; if cleared, the next stop would be the 20-day SMA at $2,716, ahead of $2,750.

On the other hand, a drop below November’s 6 low of $2,652 could push the yellow metal to challenge $2,639, ahead of testing the October 10 low of $2,603.