Fed Pause, Gold Surge: Geopolitical Tensions and Rate Pause Weakens Dollar

Overview: Gold Rises as Geopolitical Risks and Fed Pause Drive Demand

• Fed Holds Rates Steady – The Federal Reserve maintained rates at 4.25% - 4.50%, signaling caution as inflation stays high but recession risks remain low.
• Dollar Weakness Continues – Powell’s mixed outlook pressured the dollar, reinforcing gold’s appeal as a hedge.
• Geopolitical Tensions Intensify – Israel’s military action in Gaza and uncertainty over a Ukraine-Russia truce fueled risk aversion.
• Gold Hits Key Levels – Safe-haven demand pushed gold higher, with traders eyeing breakout confirmations or retracements for the next move.

Rate Pause: Dollar Continues Downside Trajectory

The Federal Reserve held interest rates steady at 4.25% - 4.50%, signaling a cautious approach to monetary policy amid slowing economic growth and persistent inflation. This decision, widely anticipated by markets, triggered a renewed wave of dollar weakness as traders reassessed their expectations for future rate movements.

Powell: Tariff Impact on Inflation Could Be Transitory, Recession Unlikely

Federal Reserve Chair Jerome Powell addressed concerns about inflation and economic stability, stating that while inflation remains elevated, it is not expected to push the U.S. economy into a recession. He also noted that the inflationary impact of tariffs could be transitory, suggesting that any price increases due to trade policies may not be long-lasting. His remarks provide insight into the Fed’s approach to monetary policy in the face of ongoing economic pressures.

Key Takeaways from Jerome Powell’s Statement:

• No Imminent Rate Hikes: The Fed remains data-dependent, with no immediate plans for additional rate increases.
• Inflation Moderation: While inflation has eased, it remains above target, requiring continued vigilance.
• Economic Growth Concerns: The Fed acknowledges slowing growth, hinting at potential downside risks.
• Labor Market Resilience: Despite a softer economic outlook, the job market remains strong but shows signs of cooling.
• Future Policy Adjustments: Powell emphasized the Fed’s commitment to flexibility, leaving room for rate cuts if economic conditions deteriorate.

As markets adjust to this policy stance, the dollar’s downward trend could persist, especially if upcoming economic data signals further weakness. Traders will closely watch inflation reports, employment data, and global risk sentiment to gauge the next move in the currency markets.

Dollar Erased Pre-Market Gains

The U.S. dollar (DXY) erased its pre-market gains, retreating from key resistance levels as price action failed to sustain bullish momentum. The technical landscape suggests a shift in sentiment, with liquidity grabs, supply zones, and bearish order flow playing a crucial role in the reversal.

The dollar’s decline may also be influenced by Powell’s cautious market outlook, as he acknowledged that inflation remains elevated but downplayed the likelihood of a recession. His mixed signals create uncertainty, leading investors to reassess their positions.

Other Gold Catalysts

Geopolitical Tensions Rise: Israel Strikes Hamas, Ukraine-Russia Truce Uncertain

1. Israel's Military Operations Against Hamas

On March 19, 2025, the Israel Defense Forces (IDF) initiated a ground operation in the Gaza Strip, marking the first such action since a cease-fire was established earlier this year. The operation targeted the Netzarim Corridor, a strategic area dividing northern and southern Gaza. This move aims to expand the buffer zone and exert pressure on Hamas to release hostages and relinquish control over Gaza. Israeli airstrikes preceding the ground offensive resulted in over 400 Palestinian casualties, including civilians, raising international concerns about escalating violence and humanitarian impacts.

2. Ukraine-Russia 30-Day Truce Uncertainty

In Eastern Europe, efforts to establish a 30-day cease-fire between Ukraine and Russia have encountered skepticism. During a recent phone call, U.S. President Donald Trump proposed the truce, focusing on halting attacks on energy infrastructure. Russian President Vladimir Putin expressed conditional support but raised concerns that Ukraine might use the pause to regroup militarily, casting doubt on the truce's effectiveness.

3. European Skepticism and Ongoing Conflict

European leaders have reacted cautiously to the proposed partial cease-fire. German Defense Minister Boris Pistorius criticized the agreement as insufficient, questioning Putin's sincerity and suggesting it might be a tactic to weaken Ukraine's defenses. Despite the proposed truce, both Russian and Ukrainian forces have continued attacks, particularly targeting energy infrastructure, further undermining confidence in the cease-fire's viability.

Gold Rallies Amid Israel-Hamas Conflict & Ukraine-Russia Truce Uncertainty

Gold prices surged as a combination of geopolitical risks and the Federal Reserve’s policy stance drove investors toward safe-haven assets. Escalating conflicts in the Middle East, uncertainty over a Ukraine-Russia ceasefire, and the Fed’s decision to keep rates on hold have reinforced gold’s appeal. Market uncertainty and expectations of a prolonged rate pause are further fueling demand for the precious metal.

TP: Gold Targets Hit

Check out my previous forecasts on Gold:

https://acy.com/en/market-news/market-analysis/economic-uncertainty-drives-commodity-trends-gold-at-3000-gas-on-the-rise-and-oil-steady-100154/

https://acy.com/en/market-news/market-analysis/technical-outlook-gold-breaks-higher-dollar-weakens-j-o-03192025-090432/

1-Hour

We already hit the Fibonacci Extension targets at 3047 - 3055 after a strong momentum following the Fed’s rate pause.

As Gold is at profit taking environment, we could see a potential retracement on the 61.8 - 79 Fibo level with price range at 3040 - 3034.

Another scenario that we could plot for further upside is a successful break of the 3056 level for further upside.

Trading Approach

As Gold continues to get sustained with economic and geopolitical uncertainties, keep on following the trend.

1. Look for 1-Hour breakouts.
2. Follow the 20- & 50-day moving average
3. Set stops on range breakouts.

Caution: With heightened geopolitical uncertainty and central bank policies influencing price action, traders should adjust position sizes accordingly and avoid excessive leverage.

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.