(Kitco News) - The gold market is struggling to find direction as Federal Reserve Chair Jerome Powell has poured cold water on expectations for a December rate cut.
After the central bank lowered interest rates by 25 basis points in a widely anticipated move, Powell made it clear early in his press conference that another rate cut before the end of the year is far from guaranteed.
“In the Committee's discussions at this meeting, there were strongly differing views about how to proceed in December. A further reduction in the policy rate at the December meeting is not a forgone conclusion. Far from it. Policy is not on a preset course,” Powell said.
Before Powell’s remarks, markets were pricing in nearly a 90% chance of a December rate cut. However, according to the CME FedWatch Tool, investors now see only a 60% probability of further easing.
The gold market took the cautious stance in stride, though it lost some ground following what some economists described as a dovish monetary policy statement.
Spot gold last traded at $3,941.25 an ounce, down 0.25% on the day. Ahead of Powell's press conference, prices had been up 1%.
Powell said that after cutting interest rates in the past two meetings—and with limited economic data available due to the ongoing government shutdown—it may make sense to slow the pace of easing.
“What do you do if you are driving in the fog? You slow down,” he said. “The data may come back, but there is a possibility it would make sense to be more cautious about moving.”
Powell also noted that there is no risk-free path for monetary policy as the central bank balances its employment and inflation goals.
Although Powell has outlined a more cautious approach, many analysts still expect the Federal Reserve to continue cutting rates to support the weakening labor market.
Commodity analysts said that falling interest rates, while inflation remains elevated, will keep pushing down real interest rates—reducing gold’s opportunity cost as a non-yielding asset.
