Gold Drops as Powell Signals Uncertainty Over September Rate Cut

Gold prices retreated sharply on Wednesday after Federal Reserve Chair Jerome Powell offered no clear signs of an imminent rate cut, casting doubt over expectations for monetary easing in September.

As widely expected, the Fed left interest rates unchanged. However, the decision wasn’t unanimous—two FOMC members, Michelle Bowman and Christopher Waller, favored a 25-basis-point cut. Despite this dissent, Powell struck a cautious tone, emphasizing the need for more economic data before any policy shifts.

“We have made no decisions about September,” Powell said. “We will be taking that information into consideration, along with all the other data we receive.”

Following the announcement, gold initially held support at $3,300 per ounce, but selling pressure accelerated during Powell’s press conference. Spot gold last traded at $3,271.90, down 1.6% on the day.

Fed Pauses, But Markets Lose Hope for Quick Easing

While Powell acknowledged that economic activity moderated in the first half of the year, he highlighted continued strength in labor markets and consumer spending. His remarks, seen as neutral to slightly hawkish, dampened expectations for a September rate cut.

According to the CME FedWatch Tool, the probability of a rate cut in September fell to 44.2%, down from 60% prior to the press conference.

Some analysts still see room for easing. Chris Zaccarelli of Northlight Asset Management noted that Powell’s reference to inflation remaining near target and the short-lived impact of tariffs could be seen as a subtle hint toward future cuts.

“Despite the lack of explicit guidance, Powell’s tone opens the door for a possible cut in September,” said Jeffrey Roach, Chief Economist at LPL Financial. “If the economy shows further signs of weakness, the Fed is likely to act.”

Trade Deals Ease Inflation Concerns, but Uncertainty Remains

Gold’s slide also follows recent U.S. trade agreements with Japan and the EU, which include tariff adjustments. These deals reduced fears of inflation driven by trade tensions—one reason the Fed has been hesitant to cut rates aggressively.

Still, Powell warned that economic risks haven’t disappeared.

“There are many, many uncertainties left to resolve,” he said, adding that consumers are already feeling the pinch from higher tariffs. “Surveys show companies plan to pass these costs on, but in many cases, they may not be able to.”

Despite inflationary headwinds, Powell concluded that the U.S. consumer remains financially strong—for now.

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