Market sentiment turned negative as the U.S. Dollar staged a recovery, with the U.S. Dollar Index (DXY), which tracks the greenback against a basket of six currencies, rising sharply. Despite the Federal Reserve’s decision to keep interest rates unchanged for the second consecutive meeting in the 4.25%–4.50% range, gold traders were unable to drive prices higher. The central bank also announced a slowdown in the pace of quantitative tightening (QT), but it was not enough to spur gold prices upward.
Federal Reserve officials acknowledged that the labor market remains strong, though inflationary pressures persist. They emphasized that both inflation and unemployment will be closely monitored, highlighting the importance of addressing risks on both sides of their dual mandate. Additionally, the Fed revised its economic projections, forecasting two interest rate cuts in 2025, while revising down economic growth and anticipating a rise in both inflation and unemployment.
Fed Chairman Jerome Powell’s comments also contributed to market caution. Powell adopted a neutral and patient tone, noting that “uncertainty around the (economic) outlook has increased” and acknowledging that some of the tariff-related inflation had been passed on to consumers. He further indicated that the current policy stance is well-positioned to manage the economic risks and uncertainties ahead, while also pointing out that certain policies from the Trump administration had placed downward pressure on growth and increased inflation.
Meanwhile, in Gaza, Israeli airstrikes continued, resulting in at least 91 Palestinian casualties and numerous injuries, according to Reuters.
Economic Indicators and Market Movements
The U.S. 10-year Treasury note yield recovered slightly, falling one basis point to 4.183%. At the same time, the U.S. Dollar Index rose 0.34% to 103.80. U.S. real yields, as reflected by the 10-year Treasury Inflation-Protected Securities (TIPS) yield, remained flat at 1.904%, correlating inversely with gold prices.
The Federal Reserve’s Summary of Economic Projections (SEP) revealed that officials expect two rate cuts in 2025, while maintaining the fed funds rate forecast at 3.9%, unchanged from December’s projections. The Personal Consumption Expenditures (PCE) Price Index—the Fed’s preferred inflation gauge—was revised higher, along with the Unemployment Rate. GDP growth was downgraded to below 2%, signaling potential slowdowns linked to President Donald Trump’s trade policies.
Initial jobless claims for the week ending March 15 saw a slight increase, rising from 221K to 223K, but remained below the forecast of 224K, suggesting continued resilience in the labor market. However, the Philadelphia Fed Manufacturing Index dropped from 18.1 to 12.5 in February, indicating slower manufacturing activity.
The money market has priced in 69.5 basis points of Fed easing in 2025, which has led to a sharp decline in both U.S. Treasury yields and the value of the U.S. dollar.
Gold Price Technical Outlook
Gold prices remain in an upward trend, despite today’s price action forming a Doji candlestick pattern, which could signal a short-term pullback before the metal resumes its rally. The Relative Strength Index (RSI) is currently overbought, though it is expected to dip to 70 as traders take profits, potentially giving bears an opportunity to capitalize on a short-term decline in prices.
The first level of support for XAU/USD is the $3,000 mark. If this level is breached, the next support level would be the February 20 high of $2,954, followed by $2,900. On the upside, if gold rises above $3,050, the next target would be $3,100.
Conclusion
In conclusion, gold prices face a momentary retreat as market sentiment shifts and traders digest the latest economic data. However, with uncertainty surrounding both the U.S. economy and geopolitical tensions, gold remains poised to resume its upward trajectory in the longer term.