Federal Reserve Pauses Interest Rate Cuts in March FOMC Meeting, Gold Hits New All-Time High of $3,056
After the Federal Reserve (Fed) held its Federal Open Market Committee (FOMC) meeting on March 20, 2025, as expected, it decided to keep its policy rate unchanged at 4.25%-4.5%, while announcing that it would slow down the reduction of its balance sheet starting in April. The latest dot plot indicated 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, and the current monetary policy is in a “restrictive” stance to curb inflation. However, it can be adjusted flexibly should there be weakness in the labor market or a sharp drop in inflation.
He also stated that surveys show signs of slowing consumer spending, and the Fed will closely monitor signs of weakness in the real economy. Powell mentioned that progress in reducing inflation may be delayed this year, partly due to the tariffs and 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 $87,000 — Fed’s Powell: Balance Sheet Reduction to Slow Down from April, Two Rate Cuts Expected This Year, Interest Rates to Remain Unchanged — A Quick Overview of Five Key Points.
Gold Hits New Record High! Stock Market Rises, Market Shows Divergence
After the Fed decided to pause its rate cuts again, the price of spot gold surged to $3,056 per ounce this morning, briefly setting a new all-time high, before pulling back slightly to $3,050. It has risen over 16% year-to-date.
At the same time, the U.S. stock market and the cryptocurrency markets also saw an uptick, indicating that the market is divided on how to react to the Fed’s decision—some are leaning towards risk-on assets, while others are seeking refuge in gold. Experts offer the following analysis:
The rare occurrence of both the stock market and gold seeing significant gains after the FOMC meeting suggests that those who are willing to take on risk are optimistic and buying more stocks, while those who are risk-averse are buying more gold, as uncertainty grows.
Fed Chairman Powell’s statement failed to fully dispel market concerns, with those holding more conservative financial views considering the statement as one of the sources of uncertainty from the Trump administration.
When the market is divided, it’s hard to predict which direction is correct. There may be a correction either upward or downward in the future.
Interest Rate Cut Expectations Drive Gold Surge
Reuters quoted independent metals trader Tai Wong on Thursday, stating, “Gold hit a new all-time high after Powell’s remarks, with gold prices soaring above $3,000. Stock and bond prices also saw a rise, and gold prices are now in a bull market. With increased uncertainty and concerns over rising inflation, gold prices will continue to rise.”
As a safe-haven asset and a non-yielding asset, gold becomes more attractive in a low-interest-rate environment. Thus, market expectations of interest rate cuts will further spur investor demand for gold. Fed funds futures show that the probability of a rate cut in June has increased from 57% to 66%.
In its March 19 report on the gold market, Taiwan Bank pointed out that due to Israeli airstrikes on Gaza and the resurgence of Middle Eastern conflict, combined with reports that Putin will stop supplying weapons to Ukraine, as well as the European Union’s opposition to this proposal, these factors, along with U.S. Treasury Secretary’s statement that each country will receive tariff codes by April 2, have caused concern about potential global economic disruptions, leading to significant inflows into the gold market.
