Fed’s “Dovish Actions, Hawkish Rhetoric”? Gold Plummets Below $4,900
💬 Let’s Chime In: Did you expect gold to rally on Fed pause? Share your thoughts on the “hawkish words, dovish moves” and gold’s next move!
On Wednesday, the Federal Reserve announced it would keep the federal funds rate unchanged in the 3.5%-3.75% range, in line with market expectations. This marks the second time the Fed has hit the pause button after three consecutive rate cuts at the end of 2025. What truly sparked market interpretation was the simultaneous release of the interest rate dot plot — this quarterly summary of economic projections showed that the median forecast by Fed officials for the interest rate at the end of 2026 is 3.4%, meaning there will be at least one more 25-basis-point rate cut this year. Meanwhile, interest rate expectations for 2027 and 2028 have also continued their downward trend. On the surface, the Fed’s decision to hold rates steady and its vigilance against inflation signal a “hawkish” stance; yet the dot plot sends a clear message: the rate-cutting cycle is not over, and there is still room for easing in 2026. This combination of “standing pat but issuing dovish guidance” has been interpreted by the market as “dovish actions, hawkish rhetoric” — cautious in its statements, but with the actual direction of action still leaning toward rate cuts.
Powell: Decisions Made Meeting by Meeting, No Preset Path
At the subsequent press conference, Fed Chair Jerome Powell maintained his cautious tone. He stated that the recent rise in energy prices may temporarily push up overall inflation, but the scope and duration of its impact remain unclear. “Decisions will be made meeting by meeting, with no commitment to a predetermined schedule,” he emphasized, noting that the impact of the Middle East situation on the U.S. economy is still uncertain, and the Fed will closely monitor the balance between its dual goals of inflation and employment. Jamie Cox, managing partner at Harris Financial Group, commented that the Fed has chosen to temporarily overlook the supply shock caused by geopolitical conflicts, stating that “the Fed, which has a dual mandate, will not rock the interest rate boat during a supply shock.” Jeffrey Roach, chief economist at LPL Financial, believes the Fed is in a “wait-and-see mode,” and productivity gains driven by AI may become a key variable to hedge against slowing labor growth and service sector inflation.
Why Did Gold Fall Instead of Rise?$Gold - main 2604(GCmain)$
Against the backdrop of lingering rate-cut expectations, gold usually benefits, but the market reaction this time was the opposite. Spot gold plunged sharply after the decision was announced, touching $4,885.50 per ounce; silver also fell in tandem to $76.85 per ounce. Analysts believe gold prices came under pressure due to three main factors: first, the rebound of the U.S. dollar — the Fed’s optimistic assessment of the economy, combined with safe-haven demand amid Middle East tensions, pushed the dollar higher, directly suppressing gold prices; second, profit-taking pressure — since the start of the year, gold prices have risen by more than 15% due to geopolitical and inflation concerns, and some funds chose to exit after the decision was finalized; third, inflation expectations were interpreted as a “short-term disturbance,” with the market believing the Fed will not change its policy pace, weakening gold’s inflation-hedge buying.
Outlook: Powell’s Tenure Counts Down, April Meeting Takes Center Stage
Notably, this meeting was one of the last full policy meetings of Jerome Powell’s tenure as Fed Chair — his term will expire in May this year. U.S. President Trump has nominated former Fed Governor Kevin Warsh to succeed him, and the market generally expects Warsh to hold a hawkish stance, adding uncertainty to the future interest rate path. The next Fed interest rate decision will be held on April 29, which will be Powell’s last meeting in office. Most analysts predict that the Fed will keep rates unchanged until then, and the first rate cut may be delayed until the second half of the year or even the fourth quarter. For gold, it may continue to come under pressure from a strong dollar and profit-taking in the short term, but in the medium to long term, global central bank gold purchase demand, geopolitical uncertainty, and expectations that the Fed will eventually enter a rate-cutting cycle will still provide bottom support for gold prices.
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