As widely expected, the Federal Reserve announced a 25-basis point rate cut Wednesday, marking the central bank's first Fed Fund interest rate reduction since December 2024.
Fed Chairman Jerome Powell called the decision a “risk-management cut,” signaling that the central bank was moving to prop up the faltering labor market but was still trying to tame inflation.
Following the announcement, the U.S. Dollar traded with a firmer tone across the board, while both gold and silver "sold the news" of an expected outcome of the Federal Open Market Committee (FOMC) meeting.
During the press conference following the Fed's two-day meeting, once Powell told reporters there was no widespread support for a larger, half-percentage-point interest rate cut, Gold Futures reversed to move below $3700 and Silver Futures below $42 per ounce.
After delivering the quarter-point cut on Wednesday, U.S. Federal Reserve voting members expect to cut short-term interest rates by another half of a percentage point this year, based on the median of fresh projections. The central bank’s average estimates point to the Fed funds rate ending the year at 3.6%.
While acknowledging that inflation has climbed modestly in recent reports, Powell suggested the balance of risks has begun to tilt more toward protecting jobs than toward fighting inflation that remains well above its mandated 2% target.
The median expectation for another 50-basis points of rate cuts was more than FOMC members had thought three months ago, when the labor market looked stronger, and before President Donald Trump had named new Fed Board member Stephen Miran, who is supportive of rate cuts. Miran won Senate approval Sept. 15 to join the Fed Board of Governors just in time for the FOMC meeting, which began on Tuesday.
Yet, the Fed’s latest quarterly projections showed wide disagreement inside the central bank, with its Summary of Economic Projections (SEP) or "dot plot" being all over the place.
Six of the nineteen voting members said they did not want to cut rates, with one member saying they should not have cut at all, while two members said there should be only one additional rate cut this year.
The Fed's decision on Wednesday also drew a single dissent that was likely from the Fed's newest governor, Stephen Miran. This was no surprise, as Miran is also Trump's economic advisor.
The highest "dot" indicated a preference for a 4.4% policy rate at the end of this year, above the Fed's post-meeting policy rate range of 4.00%-4.25%.
At the other end of the spectrum, one policymaker - likely Miran, who had wanted a 50-basis point cut at Wednesday's meeting - wrote down a drastically lower year-end policy rate of 2.9%.
The market seeing the wide range of Fed opinions not as healthy disagreement but as a loss of confidence, is a boon for the gold price going much higher.
Alongside the dots came new economic projections adding up to stagflation, which is another strong tailwind for the gold price.
According to Yahoo Finance, inflation is now seen rising 3.1%, the same as the previous estimate, while GDP was upgraded to 1.6% versus a 1.4% prediction made in June.
The unemployment rate is seen ticking up to 4.5% compared with the same estimate in June, while the unemployment rate currently stands at 4.3%.
Meanwhile, the narrative from the White House is that President Trump’s newly appointed “ringer” at the Fed (Miran) wants much larger cuts than all the other voting members.
Furthermore, the Trump administration asked the U.S. Supreme Court on Thursday to let the president move ahead with firing Federal Reserve Governor Lisa Cook, raising the risk that the market could see the Fed losing what little “independence” it is perceived to still have.
Trump has recently been stacking the Federal Reserve with loyalists, and the implications are massive as the Fed’s independence is rapidly deteriorating.
According to this Pew Research Center chart, which shows the percentage of individuals who trust the government to do what is right most of the time, confidence in the U.S. government has reached an all-time low at just 20%.
The Trump administration wants lower rates, more easy money, and a weaker dollar to bring manufacturing back to the U.S. This, along with the Fed now beginning to oblige Trump by caving on its 2% inflation target, is rocket fuel for gold.
During the press conference that followed the 2-day FOMC meeting, Powell faced pointed questions about Fed independence, given Miran’s dual role on leave from the White House’s Council of Economic Advisers.
The Fed Chairman reiterated the central bank’s commitment to its nonpartisan mandate: “We’re strongly committed to maintaining our independence…It is deeply in our culture to do our work based on incoming data.”
As to the belief in the marketplace that the Fed has begun to cave from Trump Administration pressure to lower rates in the face of rising inflation, David Kelly, chief global strategist at J.P. Morgan Asset Management, made a valid point this week.
“By the fourth quarter of this year, inflation could be 1.2 percentage points above the Fed’s target and rising, while unemployment would be just 0.3 percentage points above their target and stable,” Kelly wrote in a Sept 15 note. “If this is the outlook, why should the Fed cut at all?”
The only thing the Federal Reserve press conference made clear is that Fed "uncertainty" continues regarding jobs, GDP, and inflation, as Chairman Jerome Powell offered nothing of substance whatsoever. Not even a hint of a tangible solution or clear path forward.
If the Fed prioritizes the labor market, they will cut rapidly, and inflation—which is still nowhere near the Fed’s fantasy 2% target—will continue to run rampant. But if the central bank attempts to fight inflation, it risks triggering both an economic and a stagflationary recession across markets. In both cases, the gold price goes higher.
With both technically long-term extreme overbought gold and silver due for downside price corrections, the strong moves from both precious metals into the beginning of an expected easing cycle by the Fed this week was an ideal opportunity for traders to "sell the news" and book some profits.
Beyond the short-term, however, the macroeconomic and geopolitical backdrop remains supportive of gold going higher as fears of a global sovereign debt crisis have increased.
On Tuesday, analysts at Société Générale increased their stake in gold, taking a maximum 10% position as part of their Multi-Asset Portfolio Strategy. The bank expects gold prices to trade around $4000 per ounce through 2026.
This move by the French Bank was not surprising, as the decision came on the heels of the Fitch agency downgrading France’s credit rating last Friday, stripping the euro zone's second-largest economy of its AA- status as it grapples with political crisis and ballooning debt.
The U.S. ratings agency, one of the top global institutions gauging the financial solidity of sovereign borrowers, downgraded France on its ability to pay back debts, from AA- to A+.
President Emmanuel Macron is struggling with political instability and disagreements on how to put the country’s strained public finances in order, while reports swirl around the possibility of an IMF bailout amid political chaos and social upheaval.
Along with a renewed easing cycle by the world's most powerful central bank now set to continue into 2026, global governments are also set to continue being propped up on perpetual debt and coercive politics.
Together with global central banks at various stages of easing cycles, ongoing wars (Russia/Ukraine; Israel and most everyone in the Middle East), genocide in Gaza, wars in Africa including genocide, rising authoritarianism, particularly in the U.S., and deeply polarized politics remain catalysts for higher gold prices.
Therefore, buying on dips is likely to continue driving the safe-haven metal to fresh all-time highs well into next year, while the silver price remains the better bargain as the “poor man’s gold” is 16% below its all-time high near $50 per ounce.
The all-time high in nearby Comex silver futures is $50.36, seen in January of 1980 when the Hunt Brothers famously attempted to corner the silver market.
On the downside in December Gold, there is initial support at $3650 and $3600, with stronger support at the recent breakout level of $3500.
Following a nearly 5-month consolidation, which ended with an upside breakout in Gold Futures above $3500 last month, the technical symmetrical triangle breakout target is $3850-$4000.
After six consecutive weeks of solid gains, gold stocks are also experiencing some healthy profit-taking this week. Both GDX and GDXJ may have hit an interim peak ahead of the technical Gold Futures target of $3850-$4000 being reached, as the miners typically lead the metal.
As December Gold hit a fresh all-time high at $3740 on Tuesday, the miners sold off from fresh highs as investors faded a "sell the news" reaction to the expected 25-basis point rate cut from the Federal Reserve on Wednesday.
Although the precious metals mining sector has doubled thus far in 2025, analysts at Bank of America told Kitco this week that demand is still below previous peaks when compared to global equity holdings.
BofA also noted that compared to global equities, the mining sector represents about 0.39% of total global market capitalization—roughly in line with levels seen five years ago, but well below its 2011 peak of 0.71%.
“We wonder, if the current cycle were to continue for a sufficient period of time, could the 0.71% be reached again? It seems possible in our view,” the analysts said.
Although the mining sector may have reached an interim top this week, the higher-risk/reward junior space still has plenty of catching up to do with lower-risk late-stage juniors, miners, and royalty/streamers as most are still trading well below their 2020 highs.
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