FX.co ★ Gold Holds Steady After Fed

On Wednesday, gold prices hovered above $4,210 per ounce, remaining within a narrow band as markets assessed the implications of the Federal Reserve's expected interest rate cut and sought more guidance on its policy direction through 2026. The Fed's anticipated 25 basis point reduction brought down short real rates and alleviated a currency constraint on gold, thereby helping to establish a price floor. However, the committee's cautious communication and dot plot tempered expectations for further rate cuts, thus limiting potential price gains. Meanwhile, the dollar's depreciation following the decision affirmed the typical inverse relationship between U.S. yields and gold. Strong official demand continued to provide significant structural support, highlighted by China increasing its reserves for the 13th consecutive month, with central banks generally remaining net purchasers. This was complemented by steady inflows into ETFs and vigorous physical buying in Asia, which continued to absorb available supply.