Gold Retreats Below $4,000 as Markets Brace for Fed’s Expected 25bps Cut Amid Policy Uncertainty
Spot gold prices slipped below the critical $4,000 per ounce level on Wednesday, as investors recalibrated their positions ahead of the U.S. Federal Reserve’s highly anticipated interest rate decision. The precious metal, which has gained nearly 50% year-to-date amid heightened geopolitical risks and robust central bank demand, faced selling pressure as traders locked in profits and adjusted to a softer dollar outlook tied to expectations of monetary easing.
The Federal Open Market Committee (FOMC) is widely expected to announce a 25 basis point rate cut later today, bringing the federal funds target range to 3.75%-4.00%. However, market participants are closely monitoring Federal Reserve Chair Jerome Powell’s post-meeting press conference for insights into the central bank’s future policy trajectory. Divisions within the Fed, coupled with the ongoing U.S. government shutdown delaying key economic data releases, have added an extra layer of uncertainty to the policy outlook.
Gold’s retreat underscores its dual nature as both a safe-haven asset during periods of uncertainty and a barometer of liquidity conditions. While short-term bearish momentum has emerged in recent sessions, longer-term forecasts remain optimistic, with analysts eyeing a potential rebound toward $4,200-$4,500 by the end of the year.
Key Takeaways:
- Gold prices dropped below $4,000 per ounce amid profit-taking and market adjustments before the Fed’s anticipated rate cut.
- The Federal Reserve is widely expected to announce a 25bps rate cut, with investors eyeing Powell’s remarks for future policy signals.
- Market uncertainty persists due to divisions within the Fed and delayed economic data caused by the U.S. government shutdown.
- Central banks remain strong buyers of gold, reflecting its enduring appeal as a safe-haven asset despite short-term volatility.
- Analysts foresee potential gold price rebounds toward $4,200-$4,500 by year-end, supported by geopolitical risks and dollar weakness.
Intraday Movements: Gold Spot and Futures Under Pressure
As of 5:12 PM ET on October 28, spot gold was trading at $3,965.85 per troy ounce, marking a 0.74% decline from the previous session’s close of $3,995.90. Earlier in the day, the metal touched an intraday low of $3,941.65 around 6:52 GMT, representing a 1% drop that triggered stop-loss orders and caught some leveraged traders off-guard.
U.S. gold futures on the COMEX also experienced significant declines. The December 2025 contract settled at $3,977.60 per ounce, down 0.74% on the day and extending its weekly loss to approximately 2.8%. Trading volume surged 12% above the 20-day average as funds actively repositioned ahead of the Fed’s announcement. Implied volatility for front-month contracts rose to 18%, compared to 15% last week, signaling heightened uncertainty in the near term.
The Bloomberg Commodities Index reflected broader caution in the precious metals sector, with its gold component falling 1.1% on October 28. Silver futures mirrored this trend, declining by 1.2%, further emphasizing a risk-off sentiment among traders.
Drivers Behind Gold’s Pullback
Profit-Taking and Position Squaring
Gold’s recent retreat comes after a strong rally earlier this year that propelled prices to record highs above $4,100 per ounce. The metal has benefited from increased demand as a hedge against geopolitical risks, including ongoing conflicts in Eastern Europe and the Middle East. However, with the Fed poised to ease monetary policy further, some investors have opted to lock in profits ahead of potential market volatility following today’s rate decision.
Dollar Weakness Provides Limited Support
The U.S. dollar index (DXY) eased 0.3% to 102.45 on October 28, reflecting expectations of a dovish Fed stance. While a weaker dollar typically supports gold prices by making the metal cheaper for holders of other currencies, this tailwind was insufficient to offset broader selling pressure across commodities markets.
Uncertainty Around Future Rate Cuts
Although markets are pricing in a near-certain probability of a 25 basis point cut today—based on CME Group’s FedWatch Tool—there is less consensus on the pace and magnitude of subsequent rate reductions. A Reuters poll released earlier today indicated that economists expect two additional cuts in 2025, but internal divisions within the Fed could complicate this outlook. Traders are closely watching Powell’s remarks for clarity on whether the central bank will adopt a more aggressive easing stance or take a wait-and-see approach.
Broader Implications for Financial Markets
Gold’s price movements are often seen as an indicator of broader market sentiment and liquidity conditions. The ongoing pullback reflects a cautious tone among investors navigating an environment characterized by mixed economic data, geopolitical tensions, and policy uncertainty.
Equities and Risk Assets
Global equity markets have shown resilience ahead of the Fed decision, with Japan’s Nikkei 225 rising 0.8% during Asian trading hours on October 29 amid optimism over potential rate cuts. However, this risk-on sentiment has weighed on safe-haven assets like gold and silver in recent sessions.
Central Bank Demand Remains Strong
Despite short-term volatility, central banks continue to be net buyers of gold in 2025, driven by efforts to diversify foreign exchange reserves away from the U.S. dollar. According to data from the World Gold Council, global central bank purchases reached a record high in Q3 2025, underscoring gold’s enduring appeal as a store of value.
Impact on Emerging Markets
Emerging markets with significant gold reserves could see ripple effects from today’s Fed decision. A dovish stance could provide relief to countries grappling with debt servicing costs denominated in dollars while simultaneously supporting local currencies.
Outlook: Volatility Ahead
With gold prices hovering near their lowest levels since mid-October, market participants are bracing for heightened volatility following today’s FOMC announcement. Historically, gold has experienced average price swings of ±1.3% within 30 minutes of Fed rate decisions during easing cycles, according to Bloomberg data.
While short-term sentiment remains bearish due to profit-taking and position adjustments, analysts maintain a cautiously optimistic outlook for gold over the longer term. Factors such as sustained central bank demand, geopolitical uncertainties, and potential dollar weakness are expected to provide support for prices heading into year-end.
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Conclusion
Gold’s dip below $4,000 per ounce highlights the delicate balance between market expectations for Federal Reserve policy changes and broader macroeconomic factors influencing investor sentiment. As traders await clarity from Chair Powell’s remarks later today, all eyes remain on how the central bank navigates an increasingly complex economic landscape.
This developing story underscores the importance of staying informed about real-time market dynamics and understanding how global events shape financial markets—whether through traditional assets like gold or through currency trading opportunities facilitated by trusted brokers such as Fortune Prime Global.
Sources: Bloomberg Terminal, CME Group, World Gold Council.
