Gold Price Forecast: XAU/USD drifts higher above $4,200 as Fed delivers expected cut

• Gold price edges higher to near $4,235 in Thursday’s early Asian session. 

• Federal Reserve cut the interest rates by 25 bps at its December meeting on Wednesday. 

• Donald Trump set a deadline for the Ukraine peace deal. 

Gold price (XAU/USD) gains momentum to around $4,235 during the early Asian session on Thursday. The precious metal extends its upside after the US Federal Reserve (Fed) delivered an expected third consecutive interest rate cut and maintained its outlook for just one cut in 2026. Traders will keep an eye on the US weekly Initial Jobless Claims later on Thursday. 

The US Fed decided to lower its key lending rate by 25 basis points (bps), bringing it in a range of 3.50% to 3.75%. This marks its lowest level in three years. Fed Chair Jerome Powell said during the press conference that policymakers need time to see how the Fed's three cuts this year work their way through the US economy. 

Powell added that the Fed officials will closely examine incoming data leading up to the Fed's next meeting in January. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal. Markets are currently pricing in nearly a 78% chance that the Fed will hold interest rates steady next month, compared with a 70% probability just before the rate cut announcement, according to the CME FedWatch tool. 

US President Donald Trump told Ukrainian President Volodymyr Zelensky that he has until Christmas to accept his deal to end the war with Russia, per the Telegraph. Meanwhile, Zelensky said he is finalizing a revised peace proposal that he will deliver to the US soon, hinting at potential progress as Trump increases pressure on Kyiv to agree to a peace deal with Moscow. Any signs of progress in the Ukraine peace deal could undermine a traditional safe-haven asset like Gold in the near term.