Gold prices saw an increase on Thursday following the US Federal Reserve’s announcement of a 25-basis point rate cut. This decision slightly weakened the dollar, leading to heightened demand for gold. Spot gold rose by 0.4% to $3,942.97 per ounce, while US gold futures for December delivery fell by 1.1% to $3,955 per ounce, indicating some profit taking after recent gains.
The Federal Reserve reduced its benchmark overnight rate by a quarter of a percentage point for the second time this year, placing it in a target range of 3.75% to 4.00%, aligning with market expectations. Fed Chair Jerome Powell stated that officials are divided on future monetary policy directions and cautioned against assuming another rate cut by year-end, emphasizing that future rate adjustments will be contingent on economic performance.
Lower interest rates typically bolster demand for gold, known for being a safe haven during uncertain times and low-rate environments due to its non-interest-bearing nature compared to fixed-income assets like bonds. The dollar index dipped by 0.2% after reaching a two-week high in the previous session, making gold more affordable for buyers using other currencies. A weaker dollar often supports gold prices by enhancing its appeal to international investors.
Focus now shifts to the upcoming meeting between US President Donald Trump and Chinese President Xi Jinping in South Korea, where trade issues strained between the two countries are expected to be discussed. While US negotiators aim to restore a fragile trade truce, underlying trade challenges and policy disparities between the two major economies are likely to persist.
The SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, recorded a 0.28% decline in holdings to 1,036.05 metric tonnes on Wednesday from 1,038.92 tonnes the day before. Drops in ETF holdings often indicate investors may be securing profits or reallocating to other assets.
In the precious metals market, spot silver climbed by 0.4% to $47.71 per ounce, platinum increased by 0.6% to $1,594.90, and palladium rose by 0.8% to $1,411.51. Despite the Fed’s rate cut aiding gold stability, traders are closely monitoring global trade discussions and the trajectory of the US dollar, as any further developments or signals regarding future Federal Reserve actions could impact gold prices in the upcoming days.