Gold prices surged to an all-time high on Wednesday, driven by remarks from Federal Reserve Chair Jerome Powell and the Fed's decision to hold interest rates steady while hinting at possible rate reductions later in the year.

Spot gold rose 0.5%, reaching $3,047.80 per ounce by 3:57 p.m. ET (1957 GMT), after earlier peaking at $3,051.99. U.S. gold futures, however, remained relatively unchanged, closing at $3,041.20.

The U.S. Federal Reserve kept its benchmark policy rate unchanged at 4.25% to 4.50%, a move widely expected by the market. However, Fed officials indicated the possibility of a half-percentage-point cut in borrowing costs by the end of 2025, fueling the appeal of gold as a non-yielding asset. Powell’s remarks were accompanied by an updated economic forecast, which saw the Fed raising its inflation projection for 2025 while lowering growth expectations, a response to the economic uncertainty triggered by the Trump administration’s recent tariff policies.

Gold, traditionally viewed as a safe-haven asset during periods of economic instability and inflation, has surged over 15% in 2025 alone. The possibility of interest rate cuts has further strengthened gold’s rally, with markets now pricing in a 66% chance of rate cuts resuming at the Fed’s June meeting, up from 57% before the announcement, according to Fed fund futures data. Lower interest rates reduce the opportunity cost of holding gold, making it more attractive to investors.

The economic backdrop was not the only factor driving the rally in gold. Geopolitical tensions escalated as Russia and Ukraine traded accusations of violating a newly reached agreement to avoid strikes on energy infrastructure. These developments came shortly after U.S. President Donald Trump held a phone conversation with Russian President Vladimir Putin, adding to the uncertainty in the global landscape.

Elsewhere in the precious metals market, other metals saw declines. Silver dropped 0.7% to $33.79 per ounce, platinum edged down 0.3% to $994.15, and palladium fell 0.8% to $959.54. Despite these dips, gold’s record-breaking performance highlighted its strength as a standout asset amid a mix of economic and geopolitical pressures.

As the Federal Reserve navigates a delicate balance between inflation control and economic growth, analysts suggest that gold's upward momentum could continue, driven by ongoing global uncertainties. For now, investors appear to be flocking to gold, betting on its enduring value in a world marked by volatility. (ILKHA)