Fed Rate Cut: What Does It Mean For Gold Prices? Experts Weigh In

The Federal Reserve has resumed its rate-cutting cycle, lowering benchmark rates by 25 basis points to a new range of 4% to 4.25% after a nine-month pause.

This move has had an immediate impact on the commodities market, with spot gold briefly soaring to a record high of $3,707.57 per ounce before settling slightly lower at $3,662.

The decision signals the central bank's policy shift toward a more neutral stance, attempting to balance persistent inflation with a cooling labour market.

Market analysts are optimistic about the long-term prospects for gold following this decision. According to Anuj Gupta, a market and commodities expert, the Fed’s action was largely anticipated, and their projections for an additional 50 basis points in rate cuts in 2025 further support a positive trend for the precious metal.

"As the labour market and inflation are still a cause of concern for the Fed, they want to keep an eye on the data. Now the dollar index is correcting and trading below 96 levels, so the trend of gold is looking positive for the longer term," Gupta stated.

In the very near term there might be some profit booking as the event passed off. But according to this expert, the long term is positive for gold, as it may test $3,750 to $3,800 globally and Rs 113,000 to Rs 115,000 levels domestically by the end of 2025.

However, not all experts agree on the near-term trajectory. Amit Gupta, a senior research analyst at Kedia Advisory, cautions that the rate cut had already been priced into the market, leading to some profit-booking in gold and silver.

"The Fed's 25-basis-point cut was largely discounted, triggering profit booking in gold and silver after last year's rally. While supportive in the long term, the dollar’s rebound and a data-driven outlook suggest near-term volatility. Gold prices could see a drop towards $105,000 before further Fed easing provides additional support," he said.

The Fed's own projections reflect the complex economic picture, forecasting a long-run funds rate of 3%, core PCE inflation at 3.1% in 2025, and an unemployment rate of 4.5%. This indicates a continued balancing act for policymakers, with a focus on a weakening labour market and lingering inflation.

The outlook for gold, while volatile in the short term, appears to be a favourable one as central banks globally pivot towards looser monetary policies.