Gold slips below $3,300 after Fed holds rates not unanimously
- Fed holds rates steady, but Waller and Bowman dissent in favor of a cut.
- Statement cites moderated growth and “somewhat elevated” inflation; balance sheet runoff to continue.
- Gold capped near $3,334; support seen at $3,288 and 100-day SMA at $3,250.
Gold Price extends its losses on Wednesday after the Federal Reserve’s held interest rates unchanged though not unanimously as two dissenters, being Fed Governor Christopher Waller and Michelle Bowman. The XAU/USD traded volatile hoovering near $3,300 yet it remains down 0.71%.
XAU/USD down 0.71% as Fed flags uncertainty
On the statement, Fed officials expressed that growth of economic activity has moderated in the first half, though the unemployment rate remains low and inflation remains “somewhat elevated.”
The statement revealed the committee’s commitment to achieve maximum employment and inflation at a rate of 2% and acknowledged that “Uncertainty about the economic outlook remains elevated.”
Regarding the balance sheet reduction, the Fed revealed that they will continue to reduce its holding of Treasury securities, agency debt and agency mortgage-backed securities. Up next is the Fed Chair Jerome Powell press conference, at around 18:30 GMT.
Gold price reaction
XAU/USD aimed above $3,300, but it has retreated somewhat, as US President Donald Trump is also crossing the wires, as he signed an executive order, setting Brazil tariffs on 50%. Further upside is seen above the day’s high at $3,334. On the flip side, the firs support is $3,288, with eyes set on the 100-day SMA at $3,250.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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