HG MARKETS:

Although the Federal Reserve’s aggressive approach on future rate reduction clouded the picture for metal, gold prices recovered from a one-month low on Thursday as the central agency decreased interest rates as anticipated. Since sticky inflation was still a big worry, gold prices fell more than 2% overnight after the Fed’s policy meeting revealed fewer rate cuts in 2025. While lowering interest rates by 25 basis points, the Fed indicated that future rate decreases will be made more slowly. Lower interest rates are good for gold prices because they reduce the opportunity cost of owning gold, which makes it more appealing than interest-bearing securities like bonds.

However, following Wednesday’s decrease, gold futures experienced a steep decline as it is anticipated that rates will stay high for an extended length of time. After ruling out the possibility of a cut in January, markets now anticipate only two further cuts in 2025, down from their initial projection of four. As a reflection of policymakers’ adaptation to possible economic changes under the upcoming Donald Trump administration, Fed Chair Jerome Powell stated that additional reductions are contingent upon progress in reducing persistent inflation. Although the Federal Reserve’s aggressive approach was intended to reduce inflation, it also conveys faith in the US economy’s ability to bounce back. The demand for safe-haven assets may decline as a result of this risk-on attitude, which would further hurt bullion’s chances.

The dollar is anticipated to gain more strength in 2025 as fewer cuts are anticipated. On Wednesday, the greenback soared to a level not seen in nearly two years. The Bank of Japan also kept interest rates unchanged on Thursday, as decision-makers stayed