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Gold Prices Dip as Dollar Rises, but Fed Hints at Rate Cuts Buoy Bullion
25 Aug
Summary
- Dollar strengthened, putting pressure on gold prices
- Federal Reserve Chair Powell hinted at potential U.S. interest rate cuts
- Asian share markets rallied on the prospect of renewed rate cuts
On August 25, 2025, gold prices edged lower as the U.S. dollar crept higher. However, increased expectations of U.S. interest rate cuts following a dovish pivot from Federal Reserve Chair Jerome Powell lent support to bullion.
Spot gold was down 0.2% at $3,364.25 per ounce, as the U.S. dollar index rose 0.2% against its rivals, making gold less attractive to overseas buyers. Powell had signaled a possible interest rate cut at the U.S. central bank's meeting next month, noting that risks to the job market were rising, though inflation remained a threat.
The markets are now pricing in an 87% chance of a quarter-point rate cut at the September 17 policy meeting, and a cumulative 48 basis points of reductions by the end of 2025. Gold tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion.
Reflecting the dovish sentiment, Asian share markets rallied on Monday. However, physical gold demand in key Asian hubs remained subdued last week as price volatility kept buyers at bay, while jewelers in India resumed purchases ahead of a key festival season.
