Gold prices surged to a new all-time high of $3,052 per ounce on Wednesday following the Federal Reserve’s (Fed) decision to keep interest rates unchanged. At the time of writing, XAU/USD remains volatile, trading within the $3,035-$3,050 range, up over 0.20% on the day.
Fed Holds Rates, Signals Caution on Economic Outlook
The Fed maintained its benchmark interest rate at 4.25%-4.50% and announced plans to adjust its balance sheet in April. While acknowledging the strength of the labor market, the central bank noted that inflation remains “somewhat” elevated, reaffirming its commitment to monitoring economic risks.
Projections from Fed officials suggest two rate cuts this year, with the federal funds rate expected to hold at 3.9%—unchanged from December estimates. Growth forecasts were revised downward, reflecting a more fragile economic outlook, particularly as U.S. President Donald Trump’s trade policies weigh on economic momentum.
Fed Chair Jerome Powell, speaking after the policy decision, acknowledged rising uncertainty in the economic outlook, noting that tariff-driven inflation has been passed on to consumers. “Our current policy stance is well positioned to deal with the risks and uncertainties we face,” Powell said.
Geopolitical Risks Fuel Safe-Haven Demand
Ongoing geopolitical conflicts continue to support gold’s rally. Despite negotiations for a 30-day ceasefire, Russia-Ukraine hostilities persist, while tensions in the Middle East have escalated. Israeli airstrikes reportedly killed 400 people on Tuesday, according to Reuters, further stoking demand for safe-haven assets.
Market Drivers: Declining Real Yields and Strong Demand
The U.S. 10-year Treasury yield declined by three basis points to 4.254%.
The U.S. Dollar Index (DXY) rose 0.27% to 103.54.
Real yields, measured by the 10-year Treasury Inflation-Protected Securities (TIPS), fell by 5.5 basis points to 1.935%, reinforcing gold’s upward momentum.
The Fed’s Summary of Economic Projections (SEP) forecasts the economy growing 1.7% in 2025, down from 2.1%, with inflation expected to gradually decline to the Fed’s 2% target by 2027.
Money markets have priced in 65.5 basis points of Fed easing in 2025, driving U.S. Treasury yields lower.
Technical Outlook: Gold’s Bullish Momentum Remains Strong
Gold’s breakout above $3,000 confirms the strength of its uptrend, with the metal poised to challenge the $3,100 level. Although XAU/USD reached a record $3,052, it has struggled to sustain a decisive push beyond the psychological $3,050 mark.
The Relative Strength Index (RSI) is approaching overbought levels but remains below 80, indicating that further upside is possible.
On the downside, if gold retreats below $3,000, the first key support level lies at $2,954, followed by the $2,900 mark. However, given strong bullish momentum, any pullback may be limited as investors continue to seek safe-haven assets amid geopolitical and economic uncertainties.
