Federal Reserve’s March FOMC Meeting Pauses Rate Cuts Again, Gold Hits Historic $3,056
Following the Federal Reserve’s (Fed) March 20th Federal Open Market Committee (FOMC) meeting, the Fed decided to keep the policy interest rate unchanged at 4.25%-4.5%, as expected by the market. The Fed also announced that it will slow down its balance sheet reduction starting in April. The latest dot plot indicates that officials still expect two rate cuts in 2025.
Fed Chairman Jerome Powell emphasized after the meeting that the U.S. economy remains strong overall. Current monetary policy is in a “restrictive” stance to curb inflation, but it can be adjusted flexibly if the labor market weakens or inflation declines rapidly.
He also noted that surveys show signs of a slowdown in consumer spending. The Fed will closely monitor signals of weakness in the real economy, adding that progress in fighting inflation may be delayed this year, partly due to tariffs and several policies from the Trump administration, which have exacerbated inflation and economic uncertainty. The effects of these policies are still to be observed.
Further Reading: Bitcoin Breaks $87K | Fed’s Powell: Slowing Balance Sheet Reduction Starting April, Two Rate Cuts Expected This Year
Gold Hits Record High Again! Stock Market and Cryptos Surge, Showing Market Divergence
After the Fed’s decision to pause rate cuts, gold’s spot price surged to a new all-time high of $3,056 per ounce this morning, briefly setting a record before pulling back to $3,050. So far this year, gold has risen over 16%.
At the same time, U.S. stocks and cryptocurrencies also saw gains, indicating that the market is divided in its response to both short-term risk aversion and the appeal of risk assets. Some experts analyze this as follows:
The market witnessed a rare situation where both stocks and gold surged significantly after the Fed’s FOMC meeting, meaning those who can bear risk are buying more stocks, believing the situation is favorable, while those who cannot bear risk are buying more gold due to increasing uncertainty.
Fed Chairman Powell’s statement failed to fully alleviate market concerns. Financially conservative individuals are interpreting the Fed’s statement as one of the uncertainties brought by Trump’s policies.
When the market is divided, it is difficult to determine which view is correct, and further upward or downward adjustments may follow.
Rate Cut Expectations Drive Gold’s Surge
Reuters quoted independent metals trader Tai Wong on Thursday, stating: “Gold hit a new high after Powell’s speech, with prices surging past $3,000. Stock and bond prices also rose. Gold is currently in a bull market, and with increasing uncertainty and concerns about rising inflation, gold prices are expected to continue to rise.”
As a safe-haven asset and a non-interest-bearing investment, gold becomes more attractive in a low-interest-rate environment. Therefore, market expectations for rate cuts are further boosting investor demand for gold. Fed fund futures show that the probability of a rate cut in June has risen from 57% to 66%.
The Taiwan Bank’s gold market report on the 19th pointed out that the escalation of the Middle East conflict, with Israeli airstrikes on Gaza on Wednesday, along with concerns that Putin might stop supplying arms to Ukraine (a proposal opposed by the EU) and U.S. Treasury Secretary Janet Yellen’s statement that each country would receive tariff codes on April 2, have all led to worries that these developments could disrupt the global economy. This has contributed to the continuous influx of capital into the gold market.
