Huatai Securities: After the interest rate cut, gold prices may be under short-term pressure, but the long-term allocation value remains unchanged

Core Viewpoints

After the interest rate cut, gold may face "sell the fact" correction pressure, but long-term allocation value remains unchanged

The Federal Reserve cut interest rates by 25 basis points at the September FOMC meeting as expected, and the dot plot indicates an additional 50 basis points cut within the year, aligning with market expectations. In the short term, as the positive effects of the rate cut have been fully priced in, gold may face "sell the fact" correction pressure. This rate cut is a preemptive measure; referencing the situation after the September 2024 rate cut, gold prices may form a "phase" top after a certain period following the cut. We believe that the long-term allocation value of gold remains unchanged. On one hand, the Fed continues its rate cut path against the backdrop of economic adjustments and persistent inflation, coupled with market expectations of a potentially more accommodative Fed after Powell's term ends in 2026, the long-term concerns of stagflation in the U.S. economy remain. On the other hand, in an era of global restructuring, the trend of de-dollarization, geopolitical risks, and the demand for diversified investment portfolios are all driving global central banks and institutional investors to continuously increase their allocation to gold.

FOMC overall meets expectations, dot plot indicates two more rate cuts within the year

According to Huatai Macro's "September FOMC - Rate cut by 25bp, upward revision of rate cut forecast" (2025.09.18), on September 18th, Beijing time, the Federal Reserve announced its decision from the September meeting, cutting rates by 25bp as expected, with the dot plot indicating an additional 50bp cut within the year, and Powell expressed a dovish stance during the meeting. Considering that the employment market may still face pressure in September, supporting a rate cut in October, we have revised the number of rate cuts by the Fed this year from 2 to 3. In terms of economic forecasts, the Fed has raised its growth and inflation forecasts while lowering its unemployment rate forecast.

Cautious about chasing prices in the short term, gold prices may stage "sell the fact"

The FOMC overall met expectations, and the current pricing of gold in response to the rate cut may be relatively sufficient (after the rate cut, gold rose and then fell), and all phase-positive factors have been realized, leading to potential "buy the expectation, sell the fact" pressure in the short term. Additionally, from the meeting results, there was not much divergence within the Fed regarding the extent of the September rate cut, which somewhat alleviated market concerns about the Fed's independence. Given that this rate cut is a preventive measure, referencing the situation after the September 2024 rate cut, gold prices may form a "phase" top for a period after the cut.

We still believe that gold has long-term allocation value and recommend buying on dips

It is worth noting that although the Fed has raised its inflation forecasts for the future, the interest rate expectations provided are lower, indicating that the trend of gradually easing monetary policy may have been established. Coupled with market expectations of a potentially more accommodative Fed after Powell's term ends in 2026, the long-term concerns of stagflation in the U.S. economy remain. We still believe that gold has long-term allocation value. We reiterate that in an era of global restructuring, the trend of de-dollarization, geopolitical risks, and the demand for diversified investment portfolios are all driving global central banks and institutional investors to continuously increase their allocation to gold. This structural change in demand provides solid bottom support for gold prices. The long-term upward trend in gold may continue, and we still recommend buying on dips. We suggest paying attention to gold stocks that have both growth potential and valuation advantages Author of this article: Li Bin, Ma Xiaocheng, Source: Huatai Ruisu, Original title: "Huatai | After the interest rate cut, gold prices may be under short-term pressure, but the long-term allocation value remains unchanged"

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