19 Mar 2025

On Wednesday, the price of gold reached a new all-time high, driven by geopolitical uncertainties and trade concerns. Expectations of a Federal Reserve rate cut further support the non-yielding yellow metal. However, a slight rebound in the US dollar limits the commodity's gains ahead of the important FOMC policy decision.

During the first half of the European session on Wednesday, gold prices (XAU/USD) continued to consolidate near their record high as buyers took a moment to pause in anticipation of the FOMC policy announcement. The Federal Reserve is expected to maintain the federal funds rate within the current range of 4.25% to 4.50%. Consequently, attention will be focused on the accompanying policy statement and updated economic forecasts, including the dot plot. Additionally, comments from Fed Chair Jerome Powell during the post-meeting press conference will be scrutinized for insights into the potential trajectory of future rate cuts, which will impact the dynamics of the US dollar and provide significant momentum for the non-yielding yellow metal.

As the market approaches this pivotal central bank event, some repositioning has allowed the US dollar to gain traction, breaking a three-day losing streak that had brought it to its lowest level since October. This development is perceived as a headwind for gold prices, although the short-term outlook appears to favor bullish traders. Market participants are increasingly convinced that the Fed will implement multiple rate cuts this year due to concerns over a slowdown in the US economy driven by tariffs. Furthermore, ongoing uncertainty surrounding President Donald Trump's aggressive trade policies and geopolitical risks is likely to sustain demand for safe-haven gold. This suggests that any potential pullback in prices may be viewed as a buying opportunity and is expected to be limited.

Daily Digest Market Movers: Gold Prices Maintain Bullish Outlook Ahead of Federal Reserve Decision

Gold prices reached a new peak, nearing the $3,039 mark on Wednesday, driven by escalating tensions in the Middle East and ongoing concerns regarding US President Donald Trump's tariff strategies, which are bolstering demand for this safe-haven asset.

Israeli airstrikes targeting Hamas in Gaza have resulted in over 400 fatalities. Israeli Prime Minister Benjamin Netanyahu stated that the strikes were ordered after Hamas declined proposals to extend a ceasefire that has been in place since January.

President Trump has warned of implementing reciprocal and sector-specific tariffs, set to take effect on April 2, in addition to the existing 25% tariffs on steel and aluminum imposed since February, heightening fears of a global trade conflict.

Market participants are increasingly betting that the Federal Reserve will need to reduce interest rates more than previously anticipated this year, given the growing likelihood of an economic downturn linked to the aggressive policies of the Trump administration.

Current market expectations suggest that the Fed may cut borrowing costs by 25 basis points at the upcoming monetary policy meetings in June, July, and October, further supporting the appeal of gold.

The US Dollar has experienced a slight recovery from a five-month low reached on Tuesday, as traders reduce their bearish positions ahead of the Federal Open Market Committee (FOMC) decision, which is set to be announced later in the US session on Wednesday.

The forthcoming monetary policy statement and remarks from Fed Chair Jerome Powell will be closely analyzed for indications regarding the future trajectory of rate cuts, which will impact USD demand and subsequently influence the XAU/USD exchange rate.

Gold prices appear set to continue their established upward trend while remaining above the $3,000 threshold.

The daily Relative Strength Index (RSI) is currently above 70, indicating slightly overbought conditions. As we approach a significant central bank event, it would be wise to anticipate some short-term consolidation or a minor pullback before traders begin to position themselves for any further upward movement. The recent breakout and sustained trading above the psychological level of $3,000 suggest that the most favorable direction for gold prices is upward.

Any potential decline may be viewed as a buying opportunity, likely to be limited around the $3,005 to $3,000 range. Support is also noted near the $2,980 to $2,978 area; if this level is breached, it could trigger some technical selling, potentially pushing gold prices down to the $2,956 level. A continued downward movement could lead to further declines towards the intermediate support at $2,930 before the XAU/USD approaches the $2,900 mark, heading towards last week's swing low near the $2,880 region.