Gold prices fell on Wednesday after the U.S. Federal Reserve held its benchmark interest rate steady, triggering a cautious reaction in financial markets. The most active June 2025 gold futures contract closed at $3,391.90, down 0.9% or $30.90 from the session open of $3,448.10, hitting a low of $3,367 during intraday trading.
Federal Reserve Holds Interest Rates Amid Stagflation Fears
In a unanimous decision, the Federal Open Market Committee (FOMC) opted to keep rates within the 4.25%–4.50% range, where they’ve remained since December 2024. The Fed cited growing risks of stagflation—a troubling mix of rising inflation and slowing economic growth.
The central bank acknowledged elevated uncertainty in its post-meeting statement:
“Uncertainty about the economic outlook has increased further… The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”
Trade War Impact Weighs on Markets
The Fed’s rate decision comes as the U.S.–China trade dispute intensifies, following President Trump’s sweeping 145% tariffs on Chinese imports. Although not explicitly mentioned in the FOMC statement, Fed Chair Jerome Powell acknowledged the potential inflationary impact of the tariffs:
“Given the scope of the tariffs, there will be risks of higher inflation and unemployment… We’re in a good position to wait and see. The economy has been resilient.”
This wait-and-watch stance—while prudent—left investors uncertain, prompting a selloff in gold and risk-averse positioning in global markets.
Dollar Index Drops Slightly, Providing Limited Support
While gold slipped, the U.S. Dollar Index (DXY) edged down 0.14% to 99.725, offering marginal support to bullion prices. A weaker dollar typically benefits gold by making it cheaper for non-dollar buyers.
Outlook for XAU/USD
Gold continues to trade within a broad range, with key support near $3,367 and resistance at $3,450. Investor focus now shifts to upcoming U.S. inflation data, job reports, and any new developments in U.S.–China trade negotiations.
With stagflation risks rising and central banks holding off on easing policy, safe-haven demand for gold is expected to remain strong—but short-term volatility may persist.
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