Gold Prices Rebound Amid Fed Policy Disputes and Market Uncertainty

Gerik

Summary:

Gold prices rose nearly 0.9% to around $3,962 per ounce after a sharp multi-day decline, as conflicting signals from Federal Reserve officials on future rate cuts created investor uncertainty...

Recovery After Steep Decline

Gold prices showed signs of stabilization following a four-day slump that erased nearly 5% of value. On Thursday morning in Singapore, spot gold climbed 0.8% to $3,962.09 an ounce, partially reversing the sharp correction from last week’s record high above $4,380. The partial recovery came amid mounting market confusion over the Federal Reserve’s next move, as policymakers appear increasingly divided.

The rebound in gold was closely linked to the ambiguous direction of U.S. monetary policy. Although the Federal Reserve delivered its anticipated quarter-point rate cut on Wednesday, Chair Jerome Powell struck a more hawkish tone by downplaying expectations of further reductions in December. Despite this, the Fed’s decision was not unanimous, marking the third consecutive meeting featuring dissent among policymakers, a pattern not seen since 2019. This division has heightened investor uncertainty over whether the Fed is committed to a dovish stance or preparing to pause its easing cycle. The relationship here appears causally linked: internal disunity within the Fed is generating hesitation among investors, prompting reallocation into safer assets like gold.

Policy Ambiguity Amplified by Data Vacuum

The U.S. government shutdown that began in early October has significantly reduced the availability of official economic data, further muddying the waters for monetary policy interpretation. Without reliable macroeconomic signals, traders are left to interpret the Fed’s internal messaging and market behavior. This lack of clarity likely correlates with heightened volatility in precious metals trading, as seen in the recent swings in gold pricing.

Adding further complexity to gold’s trajectory is the apparent thawing in U.S.-China trade relations. Presidents Trump and Xi are expected to finalize a détente during their meeting in South Korea, with early reports suggesting a rollback of various tariffs and restrictions. This improving geopolitical environment is dampening gold’s traditional safe-haven appeal, introducing a headwind that could cap further rallies.

Year-to-Date Gains and Structural Demand Trends

Despite recent volatility, gold has soared approximately 50% since the start of the year. This long-term rise has been fueled by strong central-bank purchases and a growing trend known as the “debasement trade,” in which investors rotate away from sovereign bonds and fiat currencies to hedge against expanding budget deficits. These drivers suggest deeper structural demand rather than short-term speculation, indicating that gold’s upward trend may still have room to extend even after corrections.

However, near-term sentiment has weakened, as seen in five consecutive days of outflows from gold-backed ETFs, the longest streak since May. While institutional and retail interest helped fuel the initial rally, these outflows suggest some profit-taking or positioning for alternative assets as clarity on interest rates remains elusive.

Broader Precious Metals Landscape

Other precious metals mirrored gold’s modest strength. Silver gained 0.8% for the third straight day, while both platinum and palladium also advanced. The Bloomberg Dollar Spot Index eased by 0.1%, offering additional support to dollar-denominated commodities like gold.

Looking ahead, market participants are awaiting the World Gold Council’s quarterly demand report due later Thursday. The data is expected to shed more light on institutional and central bank appetite for bullion, potentially offering further direction for the metal’s short-term performance.

Gold’s recent recovery reflects a complex interaction between U.S. monetary uncertainty, geopolitical shifts, and evolving investor strategies. The current rally appears driven by both fundamental concerns over central bank credibility and structural reallocations amid global financial turbulence. Unless policy clarity emerges from the Fed or geopolitical risks recede significantly, gold is likely to remain volatile but broadly supported in the near term.

Source: Bloomberg

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