The Fed’s updated projections point to just 50 basis points of rate cuts in 2025, a shift from the 100 basis points previously expected. This more restrictive stance has boosted the US dollar, typically a headwind for gold, while putting upward pressure on government bond yields.
Short-term positioning: volatility and tactical buying
For short-term traders, volatility is likely to persist as markets react to upcoming labor and inflation data. Gold’s resilience despite a strong dollar and rising interest rates indicates that investors continue to view the precious metal as a hedge against economic and geopolitical uncertainty.
In the short term, investors are likely to buy the dips, especially if inflation surprises on the upside or economic data points to a weakening labor market. Profit-taking during sharp rallies can also be attractive to those looking to manage risk.
Heading into mid-2025, the Fed’s stance suggests only modest rate cuts in June and September. This could limit gold’s upside, especially if the dollar remains firm. Nevertheless, gold’s performance has historically been resilient during periods of restrictive Fed policy. Investors can gradually build positions in case of a pullback, although some may avoid aggressive positions until clearer signals emerge from the Fed.
Long-term outlook: bullish tailwinds from policy and politics
The long-term outlook for gold remains constructive, driven by persistent inflation concerns, continued geopolitical instability and potential shifts in US policy under a new Trump administration. Even with limited Fed cuts, demand for gold as a hedge against uncertainty and currency volatility is expected to support prices. Some investors may hold or add to gold positions over time as part of broader diversification strategies.
Strategic recommendations
Short term: Investors will likely buy the dips and take profits on sharp rallies.