Powell "cut interest rates but remained dovish" did not promise a rate cut in December. The US dollar rose in response and gold is at risk of "fading".

On Wednesday, after a second consecutive interest rate cut by the Federal Reserve, Chairman Jerome Powell stated that there may not necessarily be another rate cut at the next meeting in December, causing the US dollar exchange rate to rise. Following Powell's comments, the US Treasury bond yields rose, with the Bloomberg Dollar Spot Index soaring by 0.4%, marking the largest increase since October 9. The Swiss Franc and the British Pound saw the biggest declines among major currencies, and gold may face suppression. As widely expected by the market, the Federal Reserve policymakers reduced the benchmark interest rate by 25 basis points to a range of 3.75%-4% on Wednesday. The decision was passed with a 10-2 vote, indicating significant disagreements within the committee on the policy path. One official advocated for a more aggressive rate cut, while another opposed the cut. Additionally, the Federal Reserve announced that it would end its balance sheet contraction (QT) on December 1. The meeting statement did not provide forward guidance on the December policy path. The September dot plot had indicated the possibility of a total of three rate cuts by the end of the year, with December being the final meeting of the year. Powell bluntly stated at a press conference that there is a "strong disagreement" within the committee on whether to cut rates again in December, and that "a rate cut in December is by no means a done deal." Alex Cohen, a strategist at Bank of America, stated: "Powell's statement that a rate cut in December is not certain has led to a significant strengthening of the US dollar. This guidance is clearer than what the market expected, contradicting the near fully priced expectation of a rate cut in December." The ongoing government shutdown in the United States has delayed the release of several economic reports, making it difficult to evaluate the health of the labor market and the overall economy, adding more uncertainty to the Fed's outlook. Powell defined the recent rate cuts by the Federal Reserve as "insurance measures" aimed at ensuring sustained economic growth. Last year, the Fed initiated rate cuts, but paused them due to better-than-expected economic and inflation performance, maintaining rates unchanged until September this year. Jayati Bharadwaj, a strategist at TD Securities, noted: "If the Fed continues to characterize rate cuts as preventative measures or risk management tools, it will provide some support to the US dollar." Gold, on the other hand, may face suppression. As traders reduce their bets on further easing by the Federal Reserve, following Powell's downplaying of a rate cut in December, US bond yields and the dollar exchange rate both rose, putting pressure on gold. Gold itself does not generate interest, and is priced in dollars, which weakens its attraction. On Thursday, gold prices hovered around $3950 per ounce, having dropped by 0.6% the previous trading day. At the time of writing, spot gold prices had risen by 0.7% to $3957 per ounce. Silver prices rose for the third consecutive day, while platinum and palladium prices also moved higher. Gold had experienced a strong rally previously, with prices breaking through a historical high of $4380 per ounce last week, but has since fallen significantly. Technical indicators show signs of overheating from the previous rally; at the same time, signals of progress in US-China trade relations have weakened gold's appeal as a safe-haven asset. Leaders of the US and China were scheduled to meet in South Korea on Thursday, with expectations of reaching a easing agreement, temporarily putting the largest trade dispute on hold. Initial signals suggest that the two leaders are preparing to reach an agreement, which may involve canceling some tariffs, fees, and export restrictions that have been implemented or threatened in recent months. Despite the recent pullback, gold has accumulated about a 50% increase since the beginning of the year, benefiting from central banks buying gold and market favoritism towards "devaluation trades" - in which investors avoid sovereign debt and currencies to hedge against risks from runaway fiscal deficits. Sebastian Mullins, head of multi-asset and fixed income at Schroders, stated in a report: "The market is experiencing a natural correction, but given the breadth and depth of potential currency demand, we still believe that the current bull market in gold is not comparable to previous ones." The surge in gold prices earlier attracted institutional and retail investors to enter gold ETFs, but outflows of ETF funds this week have weakened some support. Data shows that total holdings of gold ETFs fell for the fifth consecutive day on Tuesday, marking the longest period of reduction since May. Market observers are looking forward to the quarterly demand report from the World Gold Council to be released later on Thursday, providing clues on the scale of investor and central bank demand for gold.