Gold prices dropped after the Federal Reserve decided to lower borrowing costs as expected and upward revised the fed funds rate to 3.87%, for 2025. At the time of writing, the XAU/USD trades volatile at around $2,610-$2,630.
The Federal Reserve cut rates by 25 basis points to the 4.25%-4.50% range, yet the decision was not unanimous, as Cleveland Fed President Beth Hammack opted to keep rates unchanged. When comparing the statement to the past meeting, there was little change, though traders were focused on the Summary of Economic Projections (SEP).
According to the SEP, the dot plot suggests that Fed officials see just two cuts for 2025 and two more for 2026. Officials estimate the Fed funds rate to end at 3.9% in 2025 and 3.4% in 2026.
Other projections suggest that the Fed's favorite inflation gauge, the Core PCE, is expected to end at 2.8% in 2024, 2.5 % in 2025, and 2.2% in 2026. Regarding growth, the economy is foreseen to end at 2.5% in 2024, 2.1% in 2025, and 2% in 2026.
The Unemployment Rate is expected to end the current year at 4.4% and remain unchanged at 4.3% in 2025 and 2026.
After the data, Gold prices plunged sharply as traders assessed the cut as hawkish, with just 100 basis points of easing for the next two years.
This week, investors will also focus on Thursday's US GDP data and the Fed's favorite inflation gauge, the core Personal Consumption Expenditures (PCE) Price Index, which could impact Bullion demand.(Cay) Newsmaker23
Source: Fxstreet
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