The gold market is initially taking profits following the latest signals from the Fed. Economists classify the widely predicted decision by the US central bank as a cautious start to an easing cycle – and this precise mix of the expected and restraint triggered the current breather. At the same time, the broader outlook for commodity investors remains positive: experts continue to see gold in a long-term uptrend.
On Wednesday, the Federal Reserve cut the key interest rate by 25 basis points and signaled lower rates by year-end. However, from the perspective of many economists, the move fell short of hopes for more aggressive measures. This is also highlighted by analysts at Metals Focus: according to the central bank’s latest dot plots, only a single rate cut is planned for the coming year, while the CME FedWatch Tool prices in reductions of over 100 basis points by the end of 2025. However, because the FOMC statement largely met market expectations, a short-term, technically driven profit-taking in gold is not surprising, the analysts said on Thursday.
Gold Rally not Dependent on Short-Term Decisions
From Metals Focus’s perspective, other forces are decisive for the medium to long-term price trend. The macroeconomic and geopolitical environment remains fundamentally gold-friendly; therefore, pullbacks should be used as buying opportunities and help the metal reach new all-time highs well into 2026. Even with a somewhat more restrictive outlook for 2026–27, analysts still expect additional rate cuts.
One point that has so far barely been reflected in prices, according to Metals Focus, is the political pressure on the Fed’s independence. In an interview with Kitco News before the decision, the experts recalled that President Trump has repeatedly called for significant rate cuts since the beginning of his new term. In the summer, he advocated for reductions of 300 basis points, which would push the Fed’s key interest rate to around 1%. Additionally, Trump attempted to remove Fed Governor Lisa Cook from the monetary policy committee over allegations related to mortgage fraud. This dispute is currently before US courts. In Wednesday’s vote, Trump’s candidate Stephen Miran was the only one to vote against the cut – he advocated for a 50 basis point move.
Economists warn that the US dollar could suffer if the market perceives the central bank as an extension of the White House. Metals Focus identifies the threat to the Fed’s independence as a key uncertainty that is not priced in. A breach of this independence could undermine the dollar. While questioning the US currency’s role as a global reserve might be too far-reaching, questions would certainly arise.
Beyond US domestic politics, strategic demand remains a factor. Although the gold buying sentiment of central banks has weakened over the summer, Metals Focus expects reserves to continue rising as institutions diversify and gradually move away from the dollar. Should the Fed yield to political pressure, inflation risks could also increase – a scenario that traditionally provides tailwinds for gold. Metals Focus emphasizes the mechanism: falling interest rates coupled with rising inflation depress real yields and thus reduce the opportunity cost of holding gold as a non-interest-bearing asset.
For investors, this means: The current consolidation follows the logic of expectations but does not change the positive underlying trend. Therefore, those involved in commodity markets may still find entry points during pullbacks – supported by an environment that structurally backs gold.
