The FOMC’s rate cut overnight initially pressured Dollar and Treasury yields lower, while Gold surged to new records. But sentiment quickly reversed as markets interpreted the decision and projections as less dovish than hoped. The Dollar rebounded, 10-year yields recovered after slipping below 4%, and Gold retreated from its peak.
The turning point came from Chair Jerome Powell’s tone at the press conference. He described the cut as a matter of “risk management,” not a reflection of significant economic weakness. By calling policy “more neutral,” Powell signaled the Fed’s intent to stay flexible rather than embark on aggressive easing.
There are other less dovish than expected elements too:
- The vote reinforced that cautious stance. Only newly confirmed Governor Stephen Miran dissented in favor of a larger 50bps move. Even typically dovish members Christopher Waller and Michelle Bowman sided with the majority, suggesting that the Committee remains cautious about delivering outsized easing.
- The Fed’s dot plot met market expectations by signaling two more cuts this year, in October and December. However, only one additional cut is projected in 2026 and another in 2027, showing a shallow glide path rather than a deep easing cycle.
- The projections for growth and employment painted a more confident picture. GDP forecasts were revised higher across the board, to 1.6% in 2025, 1.8% in 2026, and 1.9% in 2027. The unemployment outlook was left unchanged at 4.5% in 2025, but nudged lower to 4.4% in 2026 and 4.3% in 2027, reflecting a view of continued labor market resilience.
- On inflation, the Fed raised its 2026 core PCE forecast from 2.4% to 2.6%, signaling concern that price pressures could linger longer than previously expected.
The combination of slightly firmer growth, resilient labor markets, and sticky inflation explains the Fed’s reluctance to commit to a faster easing cycle.
Technically, for Gold, further rise would remain in favor aslong as 3612.75 support holds. But considering bearish divergence condition, strong resistance should emerge from 323.6% projection of 3267.90 to 3408.21 from 3311.30 at 3763.34 to cap upside. Meanwhile firm break of 3612.75 support will confirm short term topping, and bring deeper correction back towards 3499.79 resistance turned support.
