Will Gold Price Benefit from a Fed Rate Cut?

What will come out of the Fed meeting?

Investors are awaiting the outcome of tomorrow’s Federal Reserve meeting. Members are expected to cut the interest rate by 25 basis points, and the Fed will release its economic projections for growth, inflation, and unemployment for the coming period, along with the dot plot showing members’ views on the direction of interest rates next year under current conditions. Investors will also listen to the press conference that Fed Chair Powell will hold after the rate decision to gain more clarity on the reasons and the direction of monetary policy.

Diverging views within the Federal Open Market Committee

Policymakers acknowledge that, even after reducing the rate from 5.50% to 4.00%, the Fed’s policy has not yet reached a neutral territory that neither stimulates nor restrains growth. Despite a slowdown in U.S. labor market performance, the minutes of the last Fed meeting revealed that some members are cautious about further cuts. From their perspective, unemployment has not risen enough to justify rushing rate cuts. They are also concerned about continued inflationary pressure due to tariffs imposed during the second Trump administration, and the fact that major stock price indices are near all time highs. This led Chair Powell at the last press conference to hint that a rate cut is not inevitable.

On the other hand, another group of members sees the need to continue cutting rates, especially because most of the jobs added over the past two years were in the governmental sector, hospitality, and healthcare (sectors that are heavily dependent on government spending). Meanwhile, job losses have been recorded in some other sectors, which they argue calls for ongoing stimulus to reduce unemployment.

However, hints from Fed Governor Williams that a rate cut might occur at the December meeting tipped the scales in favor of another reduction. On this basis, the markets have priced in roughly a 90% probability of a 25 basis point cut at this meeting, or about 23 basis points in expected value.

Traders’ focus (especially on gold prices) will be on the Fed’s message after this meeting’s rate cut. If the message is cautious, for example signaling only one cut during 2026, it could support the U.S. dollar and negatively affect gold prices. If the message is less cautious, implying more than one cut in 2026, it could pressure the dollar and push gold prices higher.

Gold Prices – Technical Analysis

In early November, gold prices began moving sideways, forming lower high and higher low. The price repeatedly failed to break the high end of the current trading zone between $4,250 and $3,900. Nevertheless, any daily close above $4,250 could encourage bulls to push the price toward $4,500. In that scenario, the resistance level at the October 16 high of $4,380 should be considered.

Levels to Watch in the Opposite Scenario

Further failed attempts to close above $4,250 indicate insufficient momentum to resume the uptrend. A break below the upward trendline drawn from the October 28 low, along with the 50 day simple moving average, could signal a possible decline toward the low end of the current trading zone. A daily close below $3,900 could trigger a bearish move toward $3,675, with the support level at $3,791 needing close monitoring.

Gold – Daily Price Chart

Chart Source: ADSS Platform