Gold trading reminder: skyrocketing more than $60, a new record high! The Federal Reserve's three interest rate cuts are unchanged, and the market has another upsurge. "

On Thursday (March 21), spot gold continued its overnight rally in Asian markets, briefly setting an all-time high of $2222.65 an ounce, teaching the Federal Reserve to rise more than $60 before the interest rate decision. Gold climbed more than 1% on Wednesday after the Federal Reserve hinted that they expected to cut interest rates by 75 basis points by the end of 2024, sending the dollar and U.S. Treasury yields lower.

(Daily chart of spot gold)

The Federal Reserve kept interest rates steady on Wednesday, but policymakers signaled they still expect to cut rates by 75 basis points by the end of 2024.

The Fed's updated interest rate forecasts, also known as "dot plots," show that the committee expects the federal funds rate to end the year at 4.6 percent, unchanged from December.

Federal Reserve Chairperson Jerome Powell said Wednesday that the pace of reducing the balance sheet will soon begin to slow, and that slowing the balance sheet could allow the Federal Reserve to eventually reduce its holdings of public debt by more than previously expected.

"It would be appropriate to start slowing the pace of balance sheet reduction soon," Mr. Powell said at a press conference after the FOMC meeting. But he did not give a specific time frame for the decision, saying only that policymakers were currently discussing the issue.

Powell was referring to the Fed's ongoing work to shrink its balance sheet, commonly known as quantitative tightening (QT). Fed Chairperson Jerome Powell said that in most people's minds, a rate cut is still possible this year, but it depends on the data.

Although gold is a traditional inflation hedge, interest rate cuts would encourage investment in non-yielding gold.

Tai Wong, an independent metals trader in New York, said: "Gold got double positive news today: the Federal Reserve still expects to cut interest rates three times this year, and higher interest rate forecasts in the future raise real concerns that inflation will be harder to control."

Wong added that the market was slightly more optimistic after the new dot plot maintained three rate cuts this year of 25 basis points each.

Last week, gold prices fell by nearly 1% as February's warmer-than-expected macroeconomic data suggested that inflation was persisting, dashing hopes of a rate cut.

Fed policymakers still expect three rate cuts this year, according to the median of the latest economic forecasts, but overall they have become more hawkish than when they released their last forecast three months ago. But the degree of hawkishness is significantly less than market expectations.

According to the median forecast of policymakers, the policy rate will fall to 3.9% by the end of 2025, implying three more rate cuts of 25 basis points each next year. Last December, the median forecast of policymakers was that the policy rate would fall back to 3.6% by the end of 2025.

Traders currently see a 75% chance of a rate cut in June, compared to a 60% chance before the Federal Reserve's rate decision.

After the Federal Reserve's interest rate decision and Powell's press conference, the dollar index fell sharply, closing at 103.40, down about 0.39%. On Thursday (March 21), the Asian market continued its decline, reaching a new low of 103.22 for nearly a week at 08:30, down about 0.18%.

The yield on the 10-year Treasury bond fell 0.63% on Wednesday to close at 4.269%, after hitting an intraday low of 4.233%. The yield on the US two-year Treasury bond fell 1.88% on Wednesday to close at 4.604%, a new low in the past week.

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