Gold Price Fluctuates Sharply After Fed Rate Cut and Powell’s Remarks
Gold prices experienced significant volatility in the New York session after the Federal Reserve announced a 50 basis point interest rate cut. Spot gold initially surged to a new record high of $2,600.15 per ounce, only to plummet shortly after Federal Reserve Chairman Jerome Powell’s comments. Gold dropped sharply, falling as low as $2,546.79 per ounce before closing at $2,559.18 per ounce, down 0.4% for the day.
The Fed’s decision to lower rates by 50 basis points was widely anticipated. Policymakers signaled confidence that inflation is moving toward the Fed’s 2% target, but Powell's speech indicated that further aggressive rate cuts are not guaranteed. He emphasized the need for caution, stating that future rate decisions will depend on economic conditions and should not be seen as an indicator of a continued rapid pace of cuts.
Despite the initial rally following the rate cut, Powell’s remarks caused a reversal in gold prices. His warning that the 50 basis point cut should not be viewed as a new standard led to rising bond yields and a subsequent drop in gold.
Independent metals trader Tai Wong commented on the situation, noting, “Gold surged to a new all-time high, but bond yields also rose sharply.”
Christian Borjon Valencia, an analyst at FXStreet, explained the technical aspects of the gold price movement. While the metal briefly hit its highest price ever, the inability of buyers to sustain momentum around the $2,600 mark suggests the potential for a pullback. Valencia noted that if gold falls below the September 13 low of $2,556, the next support level would be $2,550. Further declines could target the August 20 high of $2,531, with the next significant support at the September 6 low of $2,485.
Looking ahead, Valencia pointed out that if gold prices regain upward momentum, the first resistance level would be $2,600. A break above this could push prices toward psychological barriers at $2,650 and $2,700.
