(Kitco News) - The gold market is seeing solid profit-taking as economists describe the Federal Reserve’s latest move as a cautious easing cycle. Still, one research firm says gold remains in a long-term uptrend.
On Wednesday, the Fed cut rates by 25 basis points and signaled lower rates through year-end. Economists, however, said the move fell short of expectations for more aggressive action.
Metals Focus analysts noted that the Fed’s latest dot plots show only one rate cut next year. By contrast, the CME FedWatch Tool projects rates more than 100 basis points lower by year-end 2025.
“With the FOMC statement largely aligning with market expectations, some near-term technical profit-taking in gold is unsurprising,” Metals Focus said Thursday.
Analysts stressed, however, that gold’s rally is being driven by more than short-term rate policy.
“The macroeconomic and geopolitical backdrop remains supportive of gold investment and prices. Buying on dips is therefore likely to continue, helping to drive the metal to fresh all-time highs well into 2026. Even with slightly more hawkish guidance for 2026–27, further rate cuts are still anticipated,” they said.
Metals Focus managing director Philip Newman told Kitco News in an interview ahead of Wednesday’s decision that a major risk not yet priced in is political pressure on the Fed’s independence.
Since beginning his new term, President Trump has repeatedly pushed the Fed to slash rates. Over the summer, he argued for 300 basis points in cuts, which would bring the Fed funds rate to roughly 1%.
Trump has also sought to remove Fed Governor Lisa Cook from the policy committee based on allegations of mortgage fraud. Cook has not been charged, and the dispute is now before U.S. courts.
In Wednesday’s decision, Trump’s nominee Stephen Miran cast the lone dissent, favoring a 50-basis-point cut.
Economists warn the dollar could suffer if markets see the Fed as an extension of the White House.
“Federal Reserve independence is a big uncertainty, and that scenario is not priced into the market,” Newman said. “If the Fed’s independence is not preserved, that could undermine the U.S. dollar. To call into question the dollar’s role as the world’s reserve currency is maybe going too far, but questions will be raised.”
Although central bank demand slowed over the summer, Newman expects reserves to keep rising as banks diversify away from the dollar. He added that if the Fed yields to political pressure, inflation risks could spiral — a bullish scenario for gold.
Metals Focus analysts agreed, saying falling rates and rising inflation would drive real rates lower, reducing the cost of holding gold, a non-yielding asset.
