Gold prices edged lower on Thursday as bullish momentum paused following the Federal Reserve’s (Fed) latest policy decision and escalating tensions in the Middle East. The XAU/USD pair dipped 0.19% to trade at $3,042, as market sentiment soured and the US Dollar staged a recovery.
Fed Policy and US Dollar Strength
Despite the Fed holding interest rates steady at 4.25%–4.50% for the second consecutive meeting, gold traders struggled to push prices higher. The central bank also signaled a slower pace of quantitative tightening (QT), yet the US Dollar Index (DXY), which measures the greenback against a basket of six currencies, gained strength, adding pressure on gold.
Fed policymakers acknowledged the resilience of the labor market but reiterated concerns over persistent inflation. They revised their economic projections, forecasting two rate cuts in 2025, a downward adjustment to growth expectations, and a slight uptick in both inflation and the unemployment rate.
Fed Chair Jerome Powell struck a neutral and patient tone, cautioning that economic uncertainty had increased. He noted that some inflationary effects from tariffs were being passed on to consumers and defended the Fed’s current policy stance as appropriately positioned to manage risks. Powell also remarked that some policies under former President Donald Trump had dampened growth and contributed to price increases.
Geopolitical Tensions Add to Market Uncertainty
In the Middle East, escalating violence further weighed on investor sentiment. Israeli airstrikes in Gaza resulted in at least 91 Palestinian casualties and dozens of injuries, according to Reuters. Heightened geopolitical risks often boost demand for safe-haven assets like gold, but the metal’s gains were capped by the stronger US Dollar.
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