Gold prices stabilize ahead of FOMC decision
Gold prices stabilized above $4,200 per ounce on Wednesday in narrow trading ahead of the Federal Open Market Committee's (FOMC) monetary policy decision.
The relative calm immediately precedes the expected Federal Open Market Committee (FOMC) decision on US interest rates, which could set the direction of the precious metal until 2026.
Current Situation Slight uptick awaiting catalyst
Spot gold rose slightly by 0.2% to around $4,218 per ounce, before falling back near $4,200, amid a wait-and-see attitude among investors, who have already priced in an 88% chance of a 25-basis-point interest rate cut.
Analysts believe that the market is looking beyond the expected cut, as all eyes are focused on the forward guidance and the Fed's "dot plot", looking for clear signals about the path of monetary policy in 2026.
Background: "'hawkish cut" and a split within the Fed
The term 'tapering' has become the dominant term to describe the expectations for today's meeting.
This concept means that the Fed may decide to cut the interest rate, but with a clear warning to markets not to expect a continuous wave of cuts in the future.
This comes amid a split within the committee between members focused on the risks of inflationary persistence and others worried about signs of a slowdown in the labor market.
Data such as the ADP employment report and the JOLTS job openings index have painted a mixed picture, further complicating the task of policymakers.
Geopolitical risks and inflation:
Gold continues to benefit from any new geopolitical tension or data showing inflation remains above target, limiting the Fed's ability to tighten policy.
Besides these monetary factors, strong institutional demand continues to support the market.
The World Gold Council estimates that central banks bought more than 1,000 tons of gold in 2025, the second-highest annual total in history.
Interest is also mounting in silver, which broke the $60 barrier to reach new record highs above $61, supported by strong industrial demand, especially from the solar and AI sectors.
Outlook: The 2026 landscape between tightening and easing
- A dovish guidance scenario: If Jerome Powell signals a continuation of the accommodative path in 2026, gold is likely to get a strong upward momentum that could push it to test the $4,300-4,380 levels.
- The 'hawkish cut' scenario: If Powell emphasizes caution and indicates that future cuts are not guaranteed, this could lead to temporary downward pressure on gold, possibly towards the $4,100-4,150 support, before investors resume buying.
