Gold prices hover near record high amid fed caution

• Gold trades near $3,700 per ounce after five consecutive weeks of gains.
• Fed cuts interest rates by 0.25% but signals cautious approach for future policy.
• Dollar strengthens temporarily, putting short-term pressure on gold.

US Federal Reserve reduced interest rates by a quarter-point last Wednesday, a widely expected move. However, the accompanying statement reflected caution, noting persistent inflation pressures. Future rate cuts will depend fully on upcoming economic data.

Fed Chair Jerome Powell described the current cut as a “risk management” response to a weakening labor market, emphasizing that decisions will be made “meeting by meeting.” This tempered market expectations for a rapid series of rate reductions.

Market Reaction: Dollar Rises, Gold Faces Pressure

The Fed’s cautious tone caused a temporary rise in the US dollar, considered less accommodative than investors had hoped. Since gold is priced in dollars, the stronger currency briefly pressured gold prices, prompting some profit-taking after recent record gains.

Outlook: Upward Trend Remains

Despite the temporary dip, the overall outlook for gold remains bullish. Even gradual rate cuts reduce the opportunity cost of holding non-yielding assets like gold. The metal has gained nearly 40% this year, supported by geopolitical tensions and strong central bank purchases.

Futures market data reinforces this optimism. The latest Commodity Futures Trading Commission (CFTC) report, covering the week before the Fed’s decision, showed increased long positions and reduced short positions, reflecting traders’ confidence in continued gains.

Several global financial institutions maintain forecasts that gold could reach $4,000 per ounce before year-end.