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

Gold gains after Fed cuts rates by 25 bps, in line with expectations.
Fed notes balanced risks but economic uncertainty, supporting Gold’s safe-haven allure.
Powell’s upcoming remarks may offer further insights into the Fed’s rate path and economic vigilance.

Christian Borjon Valencia FXStreet

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.

Economic Indicator

Fed Interest Rate Decision

The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).

GBP/USD targets 1.3500 amid solid gains

The persistent weakness hurting the Greenback lends support to the British Pound and the rest of the risk-linked assets, sending GBP/USD to new two-day tops past 1.3480 on Wednesday. Indeed, Cable advances for the second day in a row helped by the constant optimism around a potential US-Iran deal.

EUR/USD flirts with two-month peaks around 1.1560

EUR/USD builds on Tuesday’s advance and confronts the area of multi-week highs in the 1.1550-1.1560 band on Wednesday. The continuation of the pair’s recovery comes once again on the back of the renewed selling pressure on the US Dollar, always in response to diminishing geopolitical tensions.

How Wall Street rigs the game [Video]

In this week’s Live from the Vault, Andrew Maguire is joined by Peter Antico and Sean Stone to discuss the Paradigm of Money - an in-depth expose of financial market corruption, from naked shorting to the two-tier system that protects Wall Street.

Crypto Today: Bitcoin, Ethereum advance while XRP lags amid US-Iran deal optimism

Bitcoin (BTC) hovers near $64,000 at the time of writing on Wednesday, buoyed by a marginal improvement in crypto sentiment amid growing optimism that the United States (US) and Iran could potentially reach an agreement to open the Strait of Hormuz this week. Ethereum (ETH) mirrors Bitcoin’s neutral-to-bullish outlook, trading toward $1,900.

Taking out the lines in the sand

Good Day... And a Wonderful Wednesday to you! Well, just as I suspected, my beloved Cardinals' bats went silent last night in the Bronx, and they lost 0-2... The Yankees' bats were exactly a murderer's row, but they hit 2 homers and won. I said yesterday that the song : Just Once In My Life, could be the Cardinals' song after hitting 5 home runs the previous night!

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.