Gold prices retreated during Asian trade on Wednesday as investors took profits ahead of the highly anticipated United States Federal Reserve policy decision, with markets bracing for heightened volatility depending on the central bank’s rate outlook and Chairman Jerome Powell’s comments.
By 3:35 pm AEST (5:35 am GMT), spot gold was down $11.73, or 0.3%, at US$3,678.15 per ounce, pulling back from record highs above $3,700 earlier in the week.
The Fed is widely expected to cut interest rates by 25 basis points, but traders are looking to the Summary of Economic Projections, including the Dot Plot, for signs of how many cuts may follow this year.
Recent weak August labour data and persistently high inflation have fuelled speculation of a more aggressive easing cycle, raising concerns about stagflation risks in the U.S. economy.
If the Fed signals three rate cuts by year-end, gold could quickly resume its climb to fresh records. However, if officials maintain projections for only two cuts or Powell strikes a less dovish tone, the U.S. dollar could rebound, prompting further corrections in gold.
ANZ analysts said: "Continued concerns over the Fed’s independence will also remain a focus. Trumps’ efforts to install governors on the Fed Board who are amenable to lowering interest rates received a boost yesterday after the U.S. Senate confirmed Miran, the chair of the U.S. president’s Council of Economic Advisers, as a governor.
"However, efforts to remove Lisa Cook from the board failed after the U.S. Court of Appeals for the District of Columbia allowed her to remain in post while the court decides whether her removal is legitimate."
With the Fed decision imminent, gold traders are preparing for sharp price swings, with the precious metal’s near-term trajectory hinging on how firmly policymakers embrace a dovish path.
