Gold Gains as Fed Delivers Expected Cut With Less Hawkish Tilt

Commodity

Central Bank

Summary:

The Federal Open Market Committee voted 9-3 Wednesday to lower the benchmark federal funds rate by a quarter point to a range of 3.5%-3.75%.

Gold advanced after the US Federal Reserve delivered an expected third consecutive interest rate cut and maintained its outlook for just one cut in 2026. Silver climbed to a record high.

Bullion rose as much as 0.7% as Treasury yields and the dollar declined further after policymakers’ final meeting of this year.

The Federal Open Market Committee voted 9-3 Wednesday to lower the benchmark federal funds rate by a quarter point to a range of 3.5%-3.75%. It also subtly altered the wording of its statement suggesting greater uncertainty about when it might cut rates again.

The “overall tone of the statement and updated projections as leaning dovish,” said Anna Wong, chief US economist at Bloomberg Economics. Before the FOMC statement, traders had feared a hawkish cut with further easing in question.

A dovish Fed would be positive for bullion as it typically benefits in a lower rate environment. Gold Gains as Fed Delivers Expected Cut With Less Hawkish Tilt_1

Gold Gains as Fed Delivers Expected Cut With Less Hawkish Tilt_1

Speaking to reporters after the meeting, Chair Jerome Powell suggested the Fed had now done enough to bolster the threat to employment while leaving rates high enough to continue weighing on price pressures.

Still traders kept bets on two more reductions in 2026, with the next quarter-point reduction priced in for June. The central bank forecast one quarter-point cut over the course of 2026, unchanged from its view in September.

In addition, the Fed said it will begin buying $40 billion of Treasury bills per month starting Dec. 12 as it’s looking to rebuild reserves in the financial system which dwindled while it was tightening its balance sheet.

That’s good news for gold as the move is “like mini-quantitative easing even though these are liquidity measures,” said Bart Melek, global head of commodity strategy at TD Securities.

The Fed stopped shrinking its holdings earlier this month, a process known as quantitative tightening, amid signs that reserves in the banking system were no longer abundant.

“On balance, this rate decision day should be positive for gold short-term,” said Melek, adding that expectations a new Fed chair to be appointed in May will likely be “a dove” means gold is “good into early 2026.”

Silver climbed to a record high of $61.8671 an ounce, helped by the positive sentiment in the gold market. Prices of the white metal has more than doubled this year, eclipsing gold’s 59% rise. Its rally has gathered pace since a historic supply squeeze in October. Though this crunch has eased as more metal flows into London vaults, borrowing rates remain elevated — an indication of lingering tightness. Other markets are now seeing supply constraints, with Chinese inventories at decade lows.

Spot gold rose 0.6% to $4,232.75 an ounce as of 3:42 p.m. in New York. Silver climbed to a record high of $61.9507 an ounce. Platinum and palladium fell. The Bloomberg Dollar Spot Index fell 0.4%.

Source: Bloomberg

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Gold Gains as Fed Delivers Expected Cut With Less Hawkish Tilt

Source: Bloomberg

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