Gold steadies near $4,000 as Fed delivers split 25 bps rate cut

Fed cuts rates by 25 bps to the 3.75%–4% range; decision not unanimous as Miran sought 50 bps and Schmid preferred no change.
Statement highlights moderate economic growth, slowing job gains, and inflation “somewhat elevated,” reinforcing cautious easing stance.
Fed to end balance sheet reduction on December 1, hinting at a shift toward neutral liquidity policy.

Christian Borjon Valencia FXStreet

Gold price rallies as the Federal Reserve (Fed) decided to cut interest rates by 25 basis points on Wednesday, as expected, though not unanimously. At the time of writing, XAU/USD trades volatile within the $3,990-$4,010 range as traders brace for Fed Chair Jerome Powell's press conference.

Traders eye Powell’s remarks for guidance after divided vote and signal to end balance sheet runoff

Most officials voted to reduce the fed funds rates to the 3.75%-4% range, while Fed Governor Stephen Miran voted for a 50-bps cut and Jeffrey Schmid of the Kansas City Fed opted to hold rates unchanged.

In the statement, the Fed mentioned that "economic activity has been expanding at a moderate pace." "Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated,” the Fed stated.

Regarding the balance sheet reduction, “The Committee decided to conclude the reduction of its aggregate securities holdings on December 1.”

Gold Price Reaction

XAU/USD seesawed within the $3,978-$4,010 range following the Fed’s decision, with traders waiting for Powell. The next key technical resistance seen is the day’s high at $4,030, followed by $4,050 and $4,100. On the downside, the first key support would be $3,900, followed by the current week’s low of $3,886

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).

EUR/USD flirts with weekly lows near 1.1770

EUR/USD now comes under further selling pressure, breaking below the 1.1800 support to challenge the area of weekly throughs near 1.1770 on Thursday. The pair’s decline comes in response to marked gains in the US Dollar amid steady geopolitical tensions. Ealier in the day, the ECB’s Lagarde delivered cautious remarks, although the currency remained apathetic.

GBP/USD threatens the 200-day SMA near 1.3440

GBP/USD rapidly leaves behind Wednesday’s strong advance, coming under heavy pressure and retesting the 1.3440 zone, where the critical 200-day SMA is located. Cable’s deep pullback follows the strong gains in the Greenback, while investors continue to pencil in a potential BoE rate cut in March.

Gold trims gains, slips back to around $5,170

Gold is now facing some downside pressure, hovering around the $5,170 region on Thursday. The yellow metal surrenders part of its earlier gains on the back of the resurgence of the buying interest in the Greenback. In the meantime, geopolitical tensions in the Middle East continue to limit the downside potential for now.