The Federal Reserve shocked the markets during its September meeting of the FOMC by announcing a half-point rate cut to begin a period of economic easing as signs of a slowing job environment began to surface.
Now, Fed Chairman Jerome Powell is signaling a need to put on the brakes — and traders in the bond market are taking notice.
The precious metals market has had a rough start to November, with gold surrendering about $225 an ounce, an 8% loss in just two weeks. Silver has dropped about $2.50 an ounce during the month, a 7.6% reduction. Gold traded Friday at the $2,560 level, with silver holding just above $30 an ounce.
Gold prices have dropped 8% in November, a $225 an ounce reduction in price. (Source: TradingView)
Not so fast
In a speech Thursday in Dallas, Powell said, “The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”
Those comments came in stark contrast to Powell’s assessment of the economy in September, when he showed concern for what appeared to be a slowing job market amid lowered inflation rates.
By the end of 2025, traders are suggesting a 98.2% chance of lowered interest rates, but largely only expecting about a half-point reduction. (Source: CME FedWatch)
The Fed has yet to reach its goal of 2% inflation, though it is hovering near the target.
Gold typically performs better in lower interest rate environments, and recent trading is indicative of the Fed’s newest rhetoric that suggests an elevated interest rate environment ahead.
The U.S. dollar has also worked against gold and silver prices. The currency has shown extreme strength since the election of former U.S. President Donald Trump to a four-year term.
Traders are split between expecting a quarter-point rate cut or no change for the upcoming FOMC meeting scheduled for Dec. 18. (Source: CME FedWatch)
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