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At 09:30 GMT, XAU/USD is trading $3044.77, down $2.36 or -0.08%.
Fed’s Rate Cut Plans Fuel Gold’s Strength
The Federal Reserve held interest rates steady at 4.25%-4.50% but reiterated its outlook for two cuts later this year. Gold benefits from lower rates, as they reduce the opportunity cost of holding non-yielding assets. Despite maintaining its forecast, Fed Chair Jerome Powell emphasized economic uncertainty, driven by inflationary pressures from U.S. trade tariffs.
The Fed raised its 2025 inflation forecast to 2.7%, up from 2.5%, well above its 2.0% target. Powell suggested tariff-driven inflation may be temporary, but some economists warn it could be more persistent. Meanwhile, GDP growth projections were cut to 1.7% from 2.1%, increasing fears of stagflation and raising doubts about the Fed’s ability to ease policy as planned.
Geopolitical and Economic Uncertainty Drive Demand
Gold’s rally has been reinforced by geopolitical risks and economic concerns. U.S. President Donald Trump’s tariff policies have raised fears of prolonged inflation, while U.S.-China trade tensions remain high.
Meanwhile, Middle East conflicts continue to drive safe-haven demand. On Thursday, Israeli airstrikes killed 37 Palestinians in Gaza, reigniting regional tensions. With economic instability persisting, gold remains a preferred store of value.
Market Outlook: Correction Possible, But Bullish Trend Holds
While gold’s long-term outlook remains strong, a short-term correction is possible. Nicholas Frappell of ABC Refinery noted resistance near $3,090-$3,100, where some profit-taking is expected. However, past pullbacks have been brief, with buyers quickly stepping in.
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