Gold Trading Alert: Plunge Warning! Powell's Remarks Shatter Dreams of a December Rate Cut, $4,000 Level Fails, US-China Summit Becomes a Lifeline?
2025-10-30 06:59:00
On Wednesday (October 29), spot gold experienced a dramatic rollercoaster ride. During the Asian and European sessions, gold prices surged nearly 2%, driven by both safe-haven demand and expectations of a Federal Reserve rate cut, successfully breaking through the $4,000 mark and reaching a high of $4,029.90 per ounce. However, the rally was short-lived. While the Federal Reserve cut rates by 25 basis points as expected, Fed Chairman Powell's hawkish remarks at the press conference dampened the bullish sentiment, causing gold prices to quickly give back all gains and turn lower, hitting a low of $3,916.56 per ounce before closing near $3,930, a daily decline of approximately 0.57%.
Despite the Federal Reserve's expected 25 basis point rate cut to the 3.75%-4.00% target range on Wednesday, Powell's cautious stance on further easing in December thoroughly disappointed the market.
At the press conference, Powell stated bluntly: "There is strong disagreement within the committee regarding whether to cut rates in December, and further rate cuts are by no means a certainty. Monetary policy is not on a predetermined track." He emphasized that Fed officials are finding it difficult to reach a consensus on the future path, and financial markets should not take it for granted that there will be another rate cut at the end of the year.
This statement completely shattered the market's previous "dovish" illusions. Data shows that before Powell's speech, interest rate futures implied a 95% probability of a 25 basis point rate cut in December; after the speech, this probability instantly dropped to 67.9%, a decrease of nearly 30 percentage points.
Kansas City Fed President Schmid even publicly opposed interest rate cuts, stating that persistently high inflation made him inclined to keep rates unchanged; Fed Governor Milan, on the other hand, called for a one-time 50-basis-point rate cut. The extent of internal division is evident.
Powell's hawkish comments directly ignited the dollar and U.S. Treasury yields. The dollar index surged 0.42% on Wednesday, closing at 99.13, after hitting a high of 99.35 during the session, a new high since October 15.
The US Treasury market was also turbulent: the yield on the 10-year Treasury note surged 8.6 basis points to 4.081% in late trading, marking the largest single-day increase since June 6; the yield on the 2-year Treasury note jumped 10.8 basis points to 3.602%, hitting a one-month high; and the yield on the 30-year Treasury note also rose 5.1 basis points to 4.562%.
The yield curve is showing a "bear market flattening" pattern, with the spread between the two-year and ten-year yields narrowing to 46.1 basis points, the smallest since September 11.
A stronger dollar and soaring US Treasury yields have jointly increased the opportunity cost of holding gold, significantly raising the cost for overseas buyers to purchase gold and putting considerable downward pressure on gold prices.
On the issue of liquidity, which is of utmost concern to the market, the Federal Reserve dropped a bombshell: announcing the resumption of limited Treasury bond purchases, formally ending the multi-year-long quantitative tightening (QT) policy. Specifically, the Fed will maintain its plan to hold up to $35 billion in mortgage-backed securities (MBS) per month without rollover, but starting December 1, all proceeds from maturing MBS will be reinvested in Treasury bills.
Bill Adams, chief economist at Dallas-based Comerica Bank, pointed out that as the Federal Reserve stabilizes its bond holdings, the pace of monetary market tightening will slow, but it may restart balance sheet expansion between March and September 2026 to match economic growth. This move theoretically benefits Treasury prices and lowers yields, but in the short term, it has failed to offset the impact of Powell's hawkish rhetoric.
Peter Grant, senior metals strategist at Zaner Metals, aptly observed: "Gold's reaction to Powell's withdrawal of expectations for a December rate cut is reasonable. Federal funds rate futures have significantly reduced the pricing of a rate cut, which will boost the dollar and put downward pressure on gold."
Michael Rosen, chief investment officer at Angeles Investments, added, "Powell reflects the tension within the Fed as inflation remains above target, and market expectations for a December rate cut have cooled significantly."
Adam Button, chief currency analyst at InvestingLive in Toronto, warned: "Schmid's hawkish dissent captured the sentiment of some Fed officials, and Powell may face greater pressure to curb expectations of rate cuts."
On Thursday (October 30) in early Asian trading, spot gold fluctuated narrowly around $3,940 per ounce, with cautious trading prevailing. The highlight of the day is undoubtedly the meeting between the leaders of China and the United States in Seoul, South Korea. If trade negotiations fail to achieve a breakthrough, it may provide short-term safe-haven support for gold prices; conversely, if the negotiations progress optimistically, coupled with a further cooling of expectations for a December rate cut, gold prices may face greater downward pressure.
In addition, both the Bank of Japan and the European Central Bank are expected to keep their interest rates unchanged, but any unexpected hawkish statements could exacerbate market volatility.
The gold market is at a crossroads: Powell's hawkish shift, the strengthening of both the dollar and US Treasury bonds, and the overshadowing of the positive impact of the end of quantitative tightening have all contributed to its decline. If the US-China-South Korea summit fails to deliver substantial positive results, and market expectations for a December rate cut continue to cool, gold prices could fall in the short term towards the 55-day moving average of $3763 or even lower support levels. Investors need to closely monitor subsequent statements from Federal Reserve officials, the progress of US-China negotiations, and the decisions of the Bank of Japan and the European Central Bank; any slight development could trigger significant volatility.
(Spot gold daily chart, source: FX678)
At 06:56 Beijing time, spot gold was trading at $3,944.58 per ounce.
Powell's stance shifts from dovish to hawkish: Probability of a December rate cut plummets by nearly 30%.
Despite the Federal Reserve's expected 25 basis point rate cut to the 3.75%-4.00% target range on Wednesday, Powell's cautious stance on further easing in December thoroughly disappointed the market.
At the press conference, Powell stated bluntly: "There is strong disagreement within the committee regarding whether to cut rates in December, and further rate cuts are by no means a certainty. Monetary policy is not on a predetermined track." He emphasized that Fed officials are finding it difficult to reach a consensus on the future path, and financial markets should not take it for granted that there will be another rate cut at the end of the year.
This statement completely shattered the market's previous "dovish" illusions. Data shows that before Powell's speech, interest rate futures implied a 95% probability of a 25 basis point rate cut in December; after the speech, this probability instantly dropped to 67.9%, a decrease of nearly 30 percentage points.
Kansas City Fed President Schmid even publicly opposed interest rate cuts, stating that persistently high inflation made him inclined to keep rates unchanged; Fed Governor Milan, on the other hand, called for a one-time 50-basis-point rate cut. The extent of internal division is evident.
The US dollar and US Treasury bonds both surged, putting gold prices under pressure from both domestic and international factors.
Powell's hawkish comments directly ignited the dollar and U.S. Treasury yields. The dollar index surged 0.42% on Wednesday, closing at 99.13, after hitting a high of 99.35 during the session, a new high since October 15.
The US Treasury market was also turbulent: the yield on the 10-year Treasury note surged 8.6 basis points to 4.081% in late trading, marking the largest single-day increase since June 6; the yield on the 2-year Treasury note jumped 10.8 basis points to 3.602%, hitting a one-month high; and the yield on the 30-year Treasury note also rose 5.1 basis points to 4.562%.
The yield curve is showing a "bear market flattening" pattern, with the spread between the two-year and ten-year yields narrowing to 46.1 basis points, the smallest since September 11.
A stronger dollar and soaring US Treasury yields have jointly increased the opportunity cost of holding gold, significantly raising the cost for overseas buyers to purchase gold and putting considerable downward pressure on gold prices.
Has quantitative tightening come to an end: Has the Federal Reserve "quietly" shifted to easing?
On the issue of liquidity, which is of utmost concern to the market, the Federal Reserve dropped a bombshell: announcing the resumption of limited Treasury bond purchases, formally ending the multi-year-long quantitative tightening (QT) policy. Specifically, the Fed will maintain its plan to hold up to $35 billion in mortgage-backed securities (MBS) per month without rollover, but starting December 1, all proceeds from maturing MBS will be reinvested in Treasury bills.
Bill Adams, chief economist at Dallas-based Comerica Bank, pointed out that as the Federal Reserve stabilizes its bond holdings, the pace of monetary market tightening will slow, but it may restart balance sheet expansion between March and September 2026 to match economic growth. This move theoretically benefits Treasury prices and lowers yields, but in the short term, it has failed to offset the impact of Powell's hawkish rhetoric.
Institutions unanimously bearish: Gold prices face further short-term headwinds.
Peter Grant, senior metals strategist at Zaner Metals, aptly observed: "Gold's reaction to Powell's withdrawal of expectations for a December rate cut is reasonable. Federal funds rate futures have significantly reduced the pricing of a rate cut, which will boost the dollar and put downward pressure on gold."
Michael Rosen, chief investment officer at Angeles Investments, added, "Powell reflects the tension within the Fed as inflation remains above target, and market expectations for a December rate cut have cooled significantly."
Adam Button, chief currency analyst at InvestingLive in Toronto, warned: "Schmid's hawkish dissent captured the sentiment of some Fed officials, and Powell may face greater pressure to curb expectations of rate cuts."
Asian markets traded in a narrow range as attention turned to the US-China summit in South Korea.
On Thursday (October 30) in early Asian trading, spot gold fluctuated narrowly around $3,940 per ounce, with cautious trading prevailing. The highlight of the day is undoubtedly the meeting between the leaders of China and the United States in Seoul, South Korea. If trade negotiations fail to achieve a breakthrough, it may provide short-term safe-haven support for gold prices; conversely, if the negotiations progress optimistically, coupled with a further cooling of expectations for a December rate cut, gold prices may face greater downward pressure.
In addition, both the Bank of Japan and the European Central Bank are expected to keep their interest rates unchanged, but any unexpected hawkish statements could exacerbate market volatility.
Conclusion: With multiple negative factors looming, where will gold prices go?
The gold market is at a crossroads: Powell's hawkish shift, the strengthening of both the dollar and US Treasury bonds, and the overshadowing of the positive impact of the end of quantitative tightening have all contributed to its decline. If the US-China-South Korea summit fails to deliver substantial positive results, and market expectations for a December rate cut continue to cool, gold prices could fall in the short term towards the 55-day moving average of $3763 or even lower support levels. Investors need to closely monitor subsequent statements from Federal Reserve officials, the progress of US-China negotiations, and the decisions of the Bank of Japan and the European Central Bank; any slight development could trigger significant volatility.
(Spot gold daily chart, source: FX678)
At 06:56 Beijing time, spot gold was trading at $3,944.58 per ounce.
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- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
