Fed’s “Fuzzy Guidance” Fails to Halt Gold’s Rally — Markets May Have Already Priced in Policy Path

TradingKey - On Tuesday (U.S. Eastern Time), gold hit a record high of $3,790.82 per ounce, before pulling back slightly to $3,765 per ounce as of this report.

Analysts attribute the surge to rising expectations of further U.S. rate cuts and escalating geopolitical uncertainty, both of which are boosting demand for the safe-haven metal.

Earlier, Federal Reserve Chair Jerome Powell delivered cautious remarks on future monetary easing. He described the central bank as facing a “challenging situation,” with risks that inflation could prove more persistent than expected, while softening labor market growth raises concerns about economic health.

However, he offered little clarity on the timing of the next rate cut.“Gold markets recognized that his comments didn’t shift the tone set last week — nothing was said that would derail gold’s upward trajectory,” said Bob Haberkorn, Market Strategist at RJO Futures.

Despite Powell’s ambiguous stance, traders still expect rate cuts in October and December, following the Fed’s 25-basis-point reduction earlier this month.

Source: www.cmegroup.com

Meanwhile, NATO warned Russia it would use “all necessary military and non-military tools” to defend itself, condemning Moscow’s “increasingly irresponsible pattern of behavior” after repeated incursions into Estonian airspace.

Investors now await Friday’s release of the U.S. Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, for further clues on the rate-cut path.

“Lower U.S. funding costs, combined with investor concerns over stretched equity valuations, threats to Fed independence, and rising geopolitical risks, have collectively fueled this rally,” said Ole Hansen, Head of Commodity Strategy at Saxo Bank.

Ricardo Evangelista, Senior Analyst at ActivTrades, added:“As geopolitical turmoil and economic uncertainty drive safe-haven demand, and expectations of a dovish Fed grow stronger, gold should consolidate above $3,750 in the near term, with a new resistance level likely forming around $3,900.”