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The U.S. dollar experienced significant volatility after the Federal Reserve cut interest rates by a quarter of a percentage point, a move that was widely anticipated by the market. Initially, the dollar weakened, hitting a four-year low against the euro, but it quickly reversed course and ended the day higher. This choppy trading session was influenced by the Fed's decision, which included projections for two additional cuts later in the year, suggesting a shift in officials' thinking about the potential for trade policies to cause lasting inflation. The dollar found some stability after Fed Chair Jerome Powell clarified that the cut was a "risk management" action and that the central bank was not on a preset course for rapid rate reductions.
The Federal Reserve's decision to lower the policy rate to the 4.00%-4.25% range was met with a mixed market reaction. While some analysts believe further losses for the dollar are likely, others, like Juan Perez of Monex USA, caution that the U.S. dollar's performance also depends on the weak global economic growth narrative, which could keep the currency from sinking completely. The rate cut aligns with a general trend of easing monetary policy among major central banks, as seen with the Bank of Canada also reducing its key policy rate. Source
According to Daniel Pavilonis, a senior commodities broker at RJO Futures, a combination of a Federal Reserve rate-cutting cycle, a weaker dollar, rising consumer inflation, and supply shortages from tariffs could create a scenario reminiscent of the 1970s economy. He believes this environment will drive not just gold, but also silver, platinum, and palladium to new record highs by the end of the year. Pavilonis argues that the Fed is compelled to cut rates due to weakening economic data, particularly in the labor market, aligning with its dual mandate to promote both stable prices and maximum employment. He suggests that while a large, sudden cut is unlikely, a series of consecutive cuts is probable.
Pavilonis explains that the precious metals market is already reflecting a broad consensus that the economy is heading back into an inflationary period. He attributes this to the government's historical tendency to inflate its way out of debt, a practice he sees Central Banks and everyday people hedging against by buying gold. He also points out that the demand for these metals will be bolstered by major industrial investments and a potential increase in infrastructure projects funded by private investment, which could further drive up prices. Due to these factors, he forecasts that gold could reach $4,000, silver could surpass $50, and both platinum and palladium could trade above $1,800 by year-end. Source
Jesse Colombo, a precious metals analyst, predicts that gold prices could reach $4,000 per ounce by year-end and into 2026, primarily driven by falling interest rates. He explains that markets are questioning the Federal Reserve's political independence, leading to a belief that the central bank might be forced to cut rates more aggressively than needed to address a weakening economy. This loss of independence and the resulting confusion in the market will continue to support rising gold prices, which he sees as a safe haven asset.
Beyond the influence of interest rates, Colombo also highlights a "volatility squeeze" as a major factor that could significantly boost gold's momentum. He notes that the VIX volatility index, which measures market fear, has fallen to levels not seen since the beginning of the year. Historically, low volatility periods often precede a big market movement, and he believes that when this suppressed volatility is released, it will lead to a dramatic decline in U.S. equities and the U.S. dollar, while propelling gold and silver even higher. He also expects that silver, which he considers to be undervalued compared to gold, will be a major beneficiary of this trend, with investment demand pushing its price to $50 an ounce. Source
Gold prices are on the rise following the release of new U.S. economic data that indicates a significant decline in the housing market. The Commerce Department reported that U.S. housing starts dropped by a greater-than-expected 8.5% in August, reaching a seasonally adjusted annual rate of 1.307 million units. This figure was well below the anticipated decrease of 3.4%. The report also showed a decline in building permits for future construction, which fell by 3.7%, signalling continued weakness in the sector.
The U.S. housing sector is a key contributor to the nation's GDP, and its struggles are seen as a drag on the broader economy. The persistent high costs and elevated mortgage rates, a result of the Federal Reserve's aggressive monetary tightening, have been pushing potential homebuyers out of the market. This weakening economic data typically correlates with a rise in gold prices, as investors seek out the precious metal as a safe-haven asset during times of economic uncertainty. Source
Société Générale, a major French bank, has increased its gold holdings to a maximum of 10% of its total portfolio, moving from a 7% position held for a year. This strategic decision is part of their quarterly Multi-Asset Portfolio Strategy and involves exiting a 3% position in the oil market. The bank's analysts stated this move is a protective measure as they anticipate the Federal Reserve will begin an easing cycle, cutting interest rates, while inflation remains high and persistent. The bank has been consistently overweight on gold since late 2022, seeing it as the only direct commodity exposure in its multi-asset portfolio.
The bank expects gold prices to rise, forecasting an average of $3,825 an ounce for the final quarter of the year and $4,128 an ounce next year. The rationale for increasing their gold position is based on several factors, including the challenge to the U.S. dollar's dominance, falling real yields due to elevated inflation and falling interest rates, and the ongoing trend of global central banks diversifying their reserves away from the U.S. dollar. The bank also became bearish on oil again, forecasting weak demand and growing supplies will weigh on prices, and made slight adjustments to its broader portfolio, anticipating a boost to global equities from a more dovish Fed. Source
The gold market is experiencing some profit-taking against the Canadian dollar following the Bank of Canada's decision to cut its overnight interest rate to 2.50%. This move was largely anticipated, and the central bank's statement indicated a greater concern for Canada's slowing economy than for inflation. Despite the rate cut, gold's initial reaction was to remain in negative territory against the Canadian dollar, although it recovered from its overnight lows.
Analysts suggest the weakness in gold against the Canadian dollar is due to investors taking profits after the precious metal recently surged to record highs above $5,000 an ounce. However, gold is holding up better against the Canadian dollar compared to the U.S. dollar, where it is facing more significant profit-taking. Economists anticipate the Bank of Canada will continue to ease interest rates throughout the remainder of the year. Source
According to the World Gold Council (WGC), China's gold market in August saw a decline in physical stock and ETF liquidations, as well as a drop in futures volumes. This was primarily driven by investors taking profits from their gold holdings to reinvest in a surging stock market, which saw the CSI300 Stock Index jump 10%. Despite a solid price rally for gold, wholesale demand decreased to its lowest August level since 2010, as the high prices deterred buyers, particularly in bar and coin sales, and investors waited on the sidelines due to a lack of clear price trends.
However, not all sectors of the Chinese gold market were weak. Jewelry demand rebounded, aided by the Chinese Valentine's Day and stable gold prices for most of the month. Additionally, gold imports into China saw a significant recovery in July, and the People’s Bank of China continued its gold-buying streak for the tenth consecutive month, adding 1.9 tonnes to its reserves. Looking forward, the WGC expects a rebound in gold investment demand as the gold price rally resumes and seasonal purchasing activities pick up for the National Day holiday in early October. Source
According to Bank of America, gold prices are projected to reach $4,000 per ounce by the second quarter of 2026, despite some recent selling pressure. The bank's analysts believe gold remains well-supported, particularly as the Federal Reserve is expected to lower interest rates while inflation remains high. Historical data since 2001 shows that gold has consistently risen every time the Fed has cut rates when the US Consumer Price Index (CPI) was above 2%, with average gains of around 13% within a year of the rate cut.
Beyond U.S. monetary policy, Bank of America points to other factors driving gold's rally. These include its appeal as a safe-haven asset amid concerns about rising global debt burdens and challenging fiscal outlooks. A weakening U.S. dollar, as its status as the world's reserve currency is questioned, is also seen as a positive for gold prices. Additionally, central banks globally are increasing their gold holdings, further contributing to the metal's upward trajectory. Source
Gold prices experienced volatile, two-sided trading in the U.S. market after the Federal Reserve's Open Market Committee (FOMC) announced a widely anticipated interest rate cut. The Fed lowered its fed funds rate range by 0.25%, the first cut since last November. This move led to some profit-taking by short-term futures traders after gold had recently hit a new record high.
Despite the immediate fluctuations, the overall near-term technical outlook for gold futures remains strong. The next upside price target is seen at $3,800, while a key support level is at $3,600. The U.S. dollar index saw a slight increase, while crude oil prices and the yield on the 10-year Treasury note experienced minor drops. Source
Image Source: Kitco News
Gold futures declined after the Federal Reserve's announcement of a 25 basis point interest rate cut, a decision that was widely anticipated by the market. The price of gold had already factored in much of the expected policy shift, but the metal's price dropped after comments from Federal Reserve Chair Jerome Powell. Despite this, gold had briefly reached a new intraday record high immediately following the rate cut announcement.
The Federal Reserve's updated projections indicate that more rate cuts are likely at the remaining meetings this year, which is typically a supportive environment for gold. Lower interest rates reduce the opportunity cost of holding non-yielding assets and can increase gold's appeal as a hedge against inflation. Analysts suggest that despite the recent pullback, the technical outlook for gold remains positive, with projections of it potentially reaching a higher price point by year-end. Source
Gold prices are gaining momentum after the Federal Reserve's decision to cut interest rates, a move that was in line with market expectations. The central bank lowered the federal funds rate to a range of 4.00% to 4.25% and also released updated economic projections, or "dot plot," that indicate a more accommodative monetary policy is on the horizon. The Fed's policy shift is a response to a slowing labor market, even though inflation remains elevated.
The Fed's revised "dot plot" shows that policymakers anticipate one more rate cut this year and two additional cuts in 2026, a more dovish outlook than previously expected. This forward guidance suggests a continuation of the current monetary easing cycle, which historically supports gold prices. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold and can make it a more attractive hedge against inflation. Source
As gold reached a new record high, economist Peter Schiff argued that the Federal Reserve is on the verge of a "catastrophic mistake" by cutting interest rates, a move he believes will precipitate a crisis of confidence in the U.S. government rather than a private credit crisis like the one in 2008. According to Schiff, the Fed's decision to cut rates prematurely, in response to banking turmoil instead of a victory over inflation, is a symptom of a larger problem. He points to foreign creditors divesting from U.S. debt and a decline in the dollar's value as evidence that a crisis of public credit is already underway.
Schiff also notes that the current rally in precious metals, which has seen silver reach a 14-year high, is being driven by central banks and sophisticated investors rather than the general public. He believes that silver remains undervalued relative to gold, and that a massive surge will occur once retail investors begin to participate. Furthermore, he warns that the institutional independence of the Federal Reserve is under threat from political pressures, which could further destabilize the U.S. financial system and contribute to the great repricing of the dollar and government debt that he believes is coming. Watch the podcast
Following the Federal Reserve's rate cut, Chair Jerome Powell's press conference was largely dominated by questions regarding the central bank's independence, particularly in light of the new appointment of Stephen Miran to the Fed board while he also serves as a top economic advisor to President Trump. Powell downplayed Miran's impact on the committee's decision-making process, stating that influence is based on the strength of data-driven arguments, and he reiterated the Fed's long-standing dual mandate of maximum employment and price stability. He directly pushed back on Miran's suggestion of a third mandate to include moderate long-term interest rates.
Powell also addressed other challenges to the Fed's independence, including a proposal from Treasury Secretary Scott Bessent for an independent review and a legal battle over President Trump’s attempt to fire Fed governor Lisa Cook. While acknowledging the risks to the labor market and the jobs data as the key drivers for the rate cut, Powell did not directly comment on these politically charged issues, stating that it would be inappropriate. He also said that the recent weakness in the labor market is more related to immigration than it is to tariffs and that inflation expectations remain stable despite recent upticks. Source
Disclaimer: These articles are provided for informational purposes only. They are not offered or intended to be used as legal, tax, investment, financial, or any other advice.
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