Yesterday, the Fed left its Fed funds rate on hold as expected at 3.50%-3.75%. and maintained its forecast of one interest rate cut in 2026, with an upgraded median core PCE inflation trend forecast to 2.7% for 2026 from the previous projection of 2.5% made in December 2025.
Also, the most notable median projection shift was the long-run fed funds rate, up to 3.1% from 3.0%. In addition, the new ‘dot plot’ highlights a notable shift toward fewer projected rate cuts, and one policymaker is suggesting a rate hike next year in 2027; meanwhile, Governor Waller withdrew his dovish dissent for a cut yesterday. Hawkish vibes are brewing inside the Fed.
Overall, the data compiled by the CME FedWatch tool has indicated that the Fed funds futures market has started to price in zero-interest rate cuts in 2026, down from as many as three cuts at the start of the year. The aggregated probability for the Fed funds rate to be at 3.25%-3.50% (a 25-bps cut from the current rate of 3.50%-3.75%) now stands at 44.8% for the last FOMC meeting in 2026 on 9 December (see Fig. 1).
The 10-year US Treasury real yield jumped by 4 bps yesterday and closed above its 50-day moving average at 1.87%, now en route to potentially retest its medium-term range resistance of 1.98% (see Fig. 2).
Gold (XAU/USD) has a significant direct correlation with the longer-term US Treasury yields, as the precious yellow metal is a non-interest income-bearing asset.
A higher 10-year US Treasury real yield will imply a higher opportunity cost for owning and holding Gold (XAU/USD), in turn, creating a “lesser demand” sentiment that drives down prices of Gold (XAU/USD).
Let us now dissect the short-term trajectory (1 to 3 days) of Gold (XAU/USD) from a technical analysis perspective.
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