Gold prices soared to a fresh all-time high of $3,052 on Wednesday following the Federal Reserve’s (Fed) decision to keep interest rates unchanged. As Fed Chair Jerome Powell addressed the markets, XAU/USD remained volatile, fluctuating between $3,035 and $3,050, up over 0.20%.
The Fed opted to maintain interest rates within the 4.25%-4.50% range while adjusting its balance sheet, set to taper off in April. While the central bank acknowledged a strong labour market, it noted that inflation remains “somewhat” elevated, reaffirming its commitment to economic stability.
Economic projections from the Fed signalled expectations for two rate cuts in 2025, with the federal funds rate projected to hold at 3.9%. However, forecasts for inflation and unemployment were revised higher, while GDP growth is expected to dip below 2%, indicating economic fragility amid US trade policies.
During his speech, Powell noted that economic uncertainty has increased, citing inflationary pressures linked to tariffs. He reassured markets that the Fed’s current policy stance is well-positioned to manage these risks.
Geopolitical Risks Support Gold’s Uptrend
Tensions on the global stage continue to fuel safe-haven demand for gold. Conflict between Russia and Ukraine remains unresolved despite talks of a temporary ceasefire. Meanwhile, hostilities in the Middle East have intensified, with Israeli airstrikes reportedly causing significant casualties.
Market Reactions: Yields Drop, Gold Eyes $3,100
The US 10-year Treasury yield fell by three basis points (bps) to 4.254%, while real yields, which inversely correlate with gold prices, dropped to 1.935%. Meanwhile, the US Dollar Index (DXY) climbed 0.27% to 103.54.
Gold’s bullish momentum remains intact, with analysts eyeing the next key resistance level at $3,100. Despite briefly touching $3,052, the metal has struggled to push decisively higher. The Relative Strength Index (RSI) indicates overbought conditions, but the strength of the trend suggests further gains may be on the horizon.
If gold pulls back below $3,000, key support levels lie at $2,954, followed by the $2,900 mark. However, with economic uncertainty and geopolitical risks driving demand, gold appears poised to maintain its upward trajectory.
