Gold (XAU) Price Forecast: Will Fed Rate Cuts Spark a Strong Rebound Rally?

Gold Prices Hold Gains as Market Eyes Fed Rate Cut

Gold prices edged higher Thursday, trading just above the 50-day moving average, as traders braced for the U.S. Federal Reserve’s decision on interest rates later in the day. The metal rebounded from a session low of $2,643.35, nearing the 50-day average of $2,639.14, with technical resistance expected at $2,666.25 and $2,697.28. Support remains around the moving average, with additional support near $2,604.39 if prices turn lower.

At 12:18 GMT, XAU/USD is trading $2666.80, up $7.62 or +0.29%.

Fed Rate Cut and Inflation Concerns Support Gold

Gold’s modest gains came as the U.S. dollar index slipped from recent highs following Donald Trump’s victory in the U.S. presidential election. A softer dollar makes gold more attractive for international buyers, providing some support for the metal. However, the long-term impact of the new administration’s policies is uncertain. According to Ricardo Evangelista, senior analyst at ActivTrades, potential inflationary pressures from Trump’s economic agenda could push the Federal Reserve to maintain higher interest rates, limiting gold’s appeal due to its non-yielding nature.

“The long-term impact of the new administration’s trade policies could lead to higher inflation, potentially forcing the Fed to maintain elevated interest rates for an extended period,” Evangelista commented. “In such a scenario, non-yielding assets like gold would likely come under additional pressure.”

Treasury Yields and Fed’s Rate Path

U.S. Treasury yields showed little movement Thursday after a sharp post-election rally. The 10-year Treasury yield increased by 2 basis points to 4.449%, while the 2-year Treasury yield edged down by less than 1 basis point to 4.262%. Market focus remains squarely on the Fed, with widespread expectations of a 25-basis-point rate cut, bringing the target range to between 4.50%-4.75%.

Market pricing indicates another possible quarter-point cut in December, with a pause expected in January, followed by more cuts through 2025. This dovish outlook, if confirmed by Fed Chair Jerome Powell’s post-meeting comments, could bolster gold’s appeal as a hedge against prolonged economic uncertainty.

Data Releases Highlight Economic Concerns

Investors will closely monitor additional economic data on Thursday, including weekly jobless claims and preliminary third-quarter productivity and unit labor costs. The market will also review September’s wholesale inventory data and consumer credit reports later in the session. Slower job growth and moderating productivity trends could support the Fed’s rate-cutting strategy, potentially lifting demand for gold as a safe-haven asset.

Market Forecast: Bullish Outlook for Gold Prices

With the Fed poised to signal a gradual easing path, and inflation risks on the horizon, gold is expected to retain its bullish momentum in the near term. UBS analyst Giovanni Staunovo projects that a rate cut, combined with a slowing labor market, will likely support gold, forecasting prices to reach $2,900 over the next 12 months. However, key technical levels near $2,666.25 and $2,697.28 may cap immediate gains. In the near term, gold’s outlook remains bullish, with room for gains if Fed policy reinforces lower yields and sustained inflationary pressure.