|

Gold prices dump over 1% on the Fed's ‘mid-cycle adjustment’ and 25 basis point rate cut

  • Gold drops to a low of $1,416 on the back of today's rate cut. 
  • Todays cut was a ‘mid-cycle adjustment’, according to Powell. 

The Federal Reserve cut rates by 25 basis points today in what Powell called a ‘mid-cycle adjustment’. In addition to cutting because of a global slowdown and a desire to recentre inflation expectations, Powell has said that today's cut was an insurance cut to ensure against downside risks in trade. Powell also feels there are signs of weak investment and manufacturing as a result of such risks already.  As a result, gold prices have dropped 1% on the decision, statement and a presser that is currently still in sessions. 

Federal Reserve outcome

  • The interest rate on excess reserves cut to 2.10% from 2.35%.
  • FOMC cuts benchmark rate by 25 basis points (bps); target range stands at 2.00% - 2.25%.
  • To conclude b/sheet reduction in august, 2-months earlier than previously indicated.
  • To roll over at auction all principal payments from holdings of treasury securities, reinvest all principal payments from agency debt and agency MBS received each month.
  • Principal payments from agency debt and agency mortgage-backed securities (MBS) up to $20 bln/month will be reinvested in treasury securities to roughly match maturity composition of outstanding Treasury securities.
  • Principal payments from agency debt and agency mortgage-backed securities in excess of $20 bln will continue to be reinvested in mortgage-backed securities.
  • Rate cut supports the committee's view that sustained economic expansion, strong labour market and near-target inflation. are most likely outcomes but uncertainties remain.
  • As it contemplates future path of fed funds rate it will continue to monitor incoming info, act as appropriate to sustain expansion.
  • Household spending growth has picked up, but business fixed investment growth has been soft and inflation compensation measures remain low.

Statement comparison 

The statement between the June 19 statement and the July 31 statement is pretty much identical hence we can expect a stronger dollar for longer unless the evolution of trade uncertainty, low inflation, global growth and the domestic economy deteriorate. However, gold should find support on global uncertain regardless. 

Gold levels

Gold has dropped over 1% on today's Federal Reserve decision.  Prices have stabilised around the 20-day moving average at 1414.40 and the 1400 round number remains intact still, a level that is back-up by a confluence of Fibos lining ahead of 1382 swing lows. Should the Dollar continue to pick up steam, with markets now looking to this week's Nonfarm Payrolls at the end of the week, then gold should find a soft patch around 1400 the figure. 

XAU/USD

Overview
Today last price1425.64
Today Daily Change-5.20
Today Daily Change %-0.36
Today daily open1430.84
 
Trends
Daily SMA201417.22
Daily SMA501373.16
Daily SMA1001332.01
Daily SMA2001300.2
Levels
Previous Daily High1432.9
Previous Daily Low1422.42
Previous Weekly High1433.6
Previous Weekly Low1411.26
Previous Monthly High1438.66
Previous Monthly Low1306.18
Daily Fibonacci 38.2%1428.9
Daily Fibonacci 61.8%1426.42
Daily Pivot Point S11424.54
Daily Pivot Point S21418.24
Daily Pivot Point S31414.06
Daily Pivot Point R11435.02
Daily Pivot Point R21439.2
Daily Pivot Point R31445.5

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

More from Ross J Burland
Share:

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

By subscribing you agree to our Terms and conditions.

Editor's Picks

EUR/USD moves sideways below 1.1800 on Christmas Eve

EUR/USD struggles to find direction and trades in a narrow channel below 1.1800 after posting gains for two consecutive days. Bond and stock markets in the US will open at the usual time and close early on Christmas Eve, allowing the trading action to remain subdued. 

GBP/USD keeps range around 1.3500 amid quiet markets

GBP/USD keeps its range trade intact at around 1.3500 on Wednesday. The Pound Sterling holds the upper hand over the US Dollar amid pre-Christmas light trading as traders move to the sidelines heading into the holiday season. 

Gold retreats from record highs, trades below $4,500

Gold retreats after setting a new record-high above $4,520 earlier in the day and trades in a tight range below $4,500 as trading volumes thin out ahead of the Christmas break. The US Dollar selling bias remains unabated on the back of dovish Fed expectations, which continues to act as a tailwind for the bullion amid persistent geopolitical risks.

Bitcoin slips below $87,000 as ETF outflows intensify, whale participation declines

Bitcoin price continues to trade around $86,770 on Wednesday, after failing to break above the $90,000 resistance. US-listed spot ETFs record an outflow of $188.64 million on Tuesday, marking the fourth consecutive day of withdrawals.

Economic outlook 2026-2027 in advanced countries: Solidity test

After a year marked by global economic resilience and ending on a note of optimism, 2026 looks promising and could be a year of solid economic performance. In our baseline scenario, we expect most of the supportive factors at work in 2025 to continue to play a role in 2026.

Avalanche struggles near $12 as Grayscale files updated form for ETF

Avalanche trades close to $12 by press time on Wednesday, extending the nearly 2% drop from the previous day. Grayscale filed an updated form to convert its Avalanche-focused Trust into an ETF with the US Securities and Exchange Commission.