How to Approach Gold After Fed's Meeting

In the Federal Reserve Open Market Committee (FOMC) meeting held on 29 October 2025, the US Federal Reserve (US Fed) cut interest rates by 25 basis points (100 basis points = 1%). It placed the target range for the federal funds rate at 3.75-4%.

This is despite inflation in the US moving up since earlier this year and remaining somewhat elevated (3% in September) vis-à-vis the target of 2%.

While the US economy expanded at a moderate pace (2.2% in Q2 2025, higher than the estimate of 2%), job gains slowed, and the unemployment rate moved up.

The FOMC stated that it seeks to achieve maximum employment and inflation at the rate of 2% over the longer run.

It also observed that uncertainty about the economic outlook remains elevated.

Giving a sense of its future course on interest rates and stance of the monetary policy, the FOMC statement said that the committee will carefully assess incoming data, the evolving outlook, and the balance of risks.

Recently, the Fed Vice Chair, Philip Jefferson, expressed that the downside risks to employment have risen relative to upside risks to inflation, and that the Fed should move "slowly" with further rate cuts.

This caution seems to have diminished the chances of another rate cut by the Fed in its December 2025 meeting, although expectations of another rate cut remain.

So far, the Fed has cut rates two successive times in 2025 - 25 bps each in September and October.

When interest rates are reduced, it augurs well for gold. But now with chances of further rate cuts decreasing, gold is also losing some of its sheen.

In US dollar terms, gold prices are down nearly -7% in the last one month. Expectations of a stronger US dollar have also attributed to this.

Besides, the reopening of the US government after a 43-day shutdown has also moved the spotlight away from the precious yellow metal.

How should you approach gold now?

A dip in the price of gold is potentially a good time to consider gold in your overall asset allocation.

Unlike financial assets, gold is a real asset. It does not carry credit or counterparty risk and may serve as a diversifier in your portfolio.

In some years, like in 2015, 2016, 2018, and 2022, when equities have disappointed investors, other asset classes such as debt and/or gold, have fared better.

In 2025, while the Nifty 50 has posted modest returns (9.6%), gold is up 60.1% in Indian rupee terms (and 54.8% in US dollar terms) against the backdrop of Trump 2.0 protectionist policies, trade wars, geopolitical tensions, and potential impact on the global economy.

In other words, gold has proved its trait of being a safe haven and store of value in such times. This is because of the negative correlation gold usually shares with a high-risk asset class, such as equity, offering a cushion to your investment portfolio.

Over the last decade, gold has clocked a CAGR of 17.1% (as of 18 November 2025), exhibiting its secular uptrend that cannot be ignored.

Will gold rise further?

If interest rate cut expectations are met, gold would move up.

Also, whenever uncertainty has gripped the world, gold has fared well. Even now, there are certain factors that are supportive of gold.

The effects of Trump 2.0's trade policies, in particular, are expected to keep the global economy and financial markets on edge with chances of trade wars, slowdown economic growth, and inflation moving up. Gold has always been an effective hedge against inflation.

Also, the geopolitical tensions persist in the Middle East, between China and Taiwan, the US and China, India and Pakistan, plus the ongoing war Russia-Ukraine war. If hostilities increase, gold is also expected to rise.

Apart from that, global debt levels are rising. As per the International Monetary Fund (IMF), global public debt, which reached 98.9% of GDP in 2020 during the COVID-19 pandemic, is expected to reach 102.3% by 2030.

As of October 2025, the IMF data shows that the world's general government gross debt already stands at 94.7% of GDP, up from 92.4% in 2024.

So, with these factors in play, gold is expected to see positive momentum.

In such times, smart investors would consider gold. Several central banks, recognising the risks, are buying gold as part of their strategic reserve management. It is important to note that gold is a High-Quality Liquid Asset (HQLA) and deserves allocation in your portfolio.

We believe in allocating 5-10% of the investment portfolio to gold at all times with a long-term view (5 to years or more), assuming moderately high risk. If you are a bit conservative, the allocation to gold may be around 10-15% with a long-term view.

Ensure you aren't taking a speculative approach or approaching gold as a substitute for any other asset class. Think from an asset allocation perspective.

Also, for investment purposes, instead of holding physical gold (which involves high holding costs, risk of theft, liquidity issues, etc.), consider investing in gold the smart way - in the form of Gold ETFs and/or Gold Savings Funds.

Ensure you are following the best-suited asset allocation for you in the current calendar year, in 2026, and beyond.

Be a thoughtful investor.

Happy investing.

Disclaimer: This article is for information purposes only. It is not a recommendation and should not be treated as such.