Gold staged a partial recovery in Asian trading after tumbling more than 2% in the previous session as the Federal Reserve adopted a more cautious tone on the pace of rate cuts next year.

Bullion climbed as much as 1.3% to trade near $2,620 an ounce. The Fed reduced borrowing costs on Wednesday, but Chair Jerome Powell said that while the bank was "on track to continue to cut," officials would first have to see more progress on inflation. Fresh quarterly forecasts showed several officials penciling in fewer rate cuts for next year, causing swap traders to significantly scale back bets on easing in 2025.

That recalibration may have been "a bit overboard," according to Christopher Wong, a strategist at Oversea-Chinese Banking Corp. "If we see US data coming in with slower job creation in coming weeks, or even tomorrow's inflation report coming in softer than expected, rate cut expectations might need to be quickly adjusted again." 

Gross domestic product and the core personal consumption expenditures index — the Fed's preferred gauge of underlying inflation — are due later this week.

The precious metal has risen by more than a quarter this year in a record-breaking run that's been supported by monetary easing in the US, safe-haven demand and sustained buying by the world's central banks. The rally has stalled since early November, however, as Donald Trump's election victory buoyed the dollar.

Spot gold climbed 1% to $2,612.35 an ounce as of 10:59 a.m. in Singapore, following a 2.3% decline on Wednesday. The Bloomberg Dollar Spot Index dipped 0.1%, after jumping 0.9% in the previous session. Silver, palladium and platinum advanced.

"Looking ahead to next year, heightened uncertainties are expected — not only from geopolitical issues but also from divergent decisions within the Fed and potential volatility introduced by Trump," said Charu Chanana, a strategist at Saxo Capital Markets Pte. "Gold is likely to remain a crucial element in stabilizing investment portfolios.

Source: Bloomberg