Gold Prices Decline After Fed's Interest Rate Decision and Projections

Despite the expected 25 basis point cut in interest rates at today's FOMC meeting, spot gold prices have declined. The decrease in spot gold prices was influenced by the Fed's statements and projections, which raised more doubts about the continuation of interest rate cuts. Spot gold dropped 1% to $2615.48 and is currently at $2620.20, reflecting a 0.87% loss compared to yesterday.

The Fed's policy statement indicates a change from the outlook presented in November, signaling uncertainties about the timing of future interest rate cuts. The new statement includes the following: “In assessing the scope and timing of additional adjustments to the federal funds rate target range, the Committee will carefully evaluate incoming data, the evolving outlook, and the balance of risks.” This language updates the previous reference to assessing “additional adjustments in the target range” without discussing “scope and timing,” indicating uncertainty about whether the central bank will continue with a different interest rate or take a pause in its January meeting.

Officials project that inflation, which was forecasted at 2.1% in September, will rise to 2.5% by 2025. They expect the median fed funds rate to finish 2025 at 3.9%, up from a previous outlook of 3.4%.