Gold prices rose nearly 0.50% after the Federal Reserve cut rates by 25 basis points. Following this, Chair Jerome Powell maintained a neutral stance. Gold is currently trading at $4,227, bouncing back from a daily low of $4,182. The Fed’s decision was not unanimous, with a 9 to 3 vote reflecting differing views on rate cuts. Inflation remains high, while risks to employment are declining, according to the Fed’s monetary policy statement. US Treasury yields fell, supporting gold prices. The 10-year note rate dropped to 4.155%, and real yields decreased to 1.895%. Concurrently, the US Dollar Index fell by 0.58% to 98.65, positively impacting gold. In technical terms, gold is around $4,200. If it drops, support levels are at $4,153 and $4,090. A dovish Fed might push gold up to $4,300. Gold is seen as a safe investment and a hedge against inflation. Central banks use it for reserves, and its price tends to rise when the US dollar and riskier assets decline, especially during geopolitical crises or economic downturns. The activities of central banks also affect gold’s market movements. As the Federal Reserve shows caution, we should see this rate cut as just one step, not a long process. The market has reacted positively to this dovish approach, but Powell’s “wait and see” stance brings uncertainty for the weeks ahead. Traders can take advantage by preparing for a potential but bumpy rise in gold toward $4,300. The Fed’s split vote highlights that the future path isn’t clear. This means using options to manage risk is essential. Buying call spreads could target potential gains while limiting risk. Additionally, buying protective puts below $4,200 could shield against any unexpected hawkish data. Powell’s concerns are evident in the recent economic data from November 2025. The Consumer Price Index (CPI) indicates core inflation is still high at 3.8%, which explains why some Fed members are hesitant to lower rates further. If new inflation data is strong, it may boost the US dollar and pose challenges for gold. Conversely, the recent jobs report for November 2025 revealed a disappointing increase of only 95,000 jobs. This weakness in the job market supports arguments for lower rates and offers a favorable boost for gold prices. Future employment figures will be crucial in influencing the Fed’s next decisions. Looking back, this situation resembles the “insurance cuts” from the Fed in 2019, aimed at supporting growth instead of combating a recession. This historical context suggests that aggressive rate cuts are unlikely unless economic conditions worsen significantly. Therefore, long-term bullish positions on gold should be approached with caution. There remains strong support for gold due to central bank activity, which underpins prices. Recent data from the World Gold Council indicates that central banks purchased an additional 250 tonnes of gold in the third quarter of 2025, continuing a trend that began in 2022. This ongoing demand can help limit any declines in gold, even amidst short-term fluctuations from Fed policy changes.

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