Gold Trading Alert: The Federal Reserve cut interest rates as expected, causing a sharp decline in the US dollar and US Treasury yields. Gold prices rebounded strongly, and silver prices hit a new all-time high.
2025-12-11 07:55:58
The Federal Open Market Committee (FOMC) of the Federal Reserve announced on Wednesday (December 10) that it would lower the target range for the federal funds rate by 25 basis points to 3.50%–3.75%, in line with market expectations. However, following the announcement, the dollar index fell sharply, hitting a low of 98.59, a new low in nearly a month and a half, before closing at 98.65, a drop of about 0.6%, marking its largest single-day decline in nearly three months. The 10-year Treasury yield also fell by 0.88 percentage points to 4.192%, similarly marking its largest single-day drop in nearly a month and a half.
Amid a weakening US dollar and US Treasury yields, spot gold quickly recovered its early losses, rebounding strongly after hitting a low of around 4182 yuan/gram, reaching a high of 4238.59 US dollars/ounce, a new high in nearly three trading days, before finally closing at 4228.47 US dollars/ounce, a daily gain of approximately 0.5%. Spot silver performed even better, breaking through and holding above the 61 US dollar mark, reaching a high of 61.92 US dollars/ounce, a new historical record, with a cumulative gain of 113% since the beginning of the year. In early Asian trading on Thursday (December 11), spot gold traded in a narrow range, currently hovering around 4230 US dollars/ounce.
The Federal Reserve's decision resulted in a rare split, with 10 votes in favor and 3 against. Chicago Fed President Goolsby and Kansas City Fed President Schmid advocated keeping interest rates unchanged, while Governor Milan favored a one-off 50-basis-point rate cut.
The latest Special Economic Projections (SEP) show that the median federal funds rate will remain at 3.00% in 2025 (meaning two further 50 basis point cuts throughout the year), consistent with the September forecast; however, only one 25 basis point rate cut is planned for 2026, the same as the previous outlook. More noteworthy is that some members have raised their 2026 interest rate forecasts, and three members even believe that future rate hikes may be necessary, highlighting that the Fed's internal disagreement on the future path of easing has reached a recent high.
Federal Reserve Chairman Jerome Powell stated at a press conference that current interest rates are sufficient to handle a variety of economic scenarios, and the next step is "highly unlikely" to be a rate hike, which is also not in the committee's baseline scenario. He also emphasized that the committee will remain highly data-dependent and will not provide timely assessments of the policy path in January and beyond, but did not offer clear forward guidance. The market interpreted this as a "pause in dovishness": the probability of significant short-term easing has decreased, but the rate-cutting cycle is not completely over.
Compared to the November statement, this statement added a new sentence: "In considering any further adjustments to the target range for the federal funds rate, the Committee will carefully assess upcoming data, the evolving outlook, and the balance of risks." This wording has historically appeared many times before a pause in rate-cutting cycles and is seen by the market as a clear signal that the Federal Reserve is about to enter a period of observation.
The CME FedWatch tool shows that the probability of a 25 basis point rate cut in January 2025 is only 22.1%, basically unchanged from the previous day;
Interest rate futures imply a cumulative rate cut of approximately 50 basis points (two cuts) by 2026, which is significantly more dovish than the 25 basis points projected in the Fed's dot plot.
Michael Rosen, chief investment officer at Angeles Investments, pointed out that the statement highlighted "weak labor market" as the main reason for this rate cut, leading the market to speculate that the door to further easing has not been completely closed.
Uto Shinohara, senior strategist at Mesirow Currency Management, believes that the dual narratives of labor market concerns and the potential for tariffs to drive up inflation are jointly suppressing the dollar.
Silver has risen 113% year-to-date, far exceeding gold's 35% performance, mainly due to:
1. Industrial demand continues to surge in sectors such as photovoltaics, artificial intelligence data centers, and electric vehicles;
2. Global mine supply growth has stagnated, and the remaining exploitable years have decreased to less than 20 years;
3. The U.S. government has officially included silver in its "critical minerals" list, significantly enhancing its strategic value.
Russian Foreign Minister Sergey Lavrov stated that the Ukraine crisis cannot be resolved peacefully without addressing its root causes, and warned that Russia is prepared to respond to hostile actions such as troop deployments or asset seizures from Europe. US President Donald Trump publicly criticized Volodymyr Zelenskyy, urging him to "be realistic," and called for swift elections in Ukraine to end the war. Geopolitical uncertainty continues to provide potential support for precious metals.
In the short term, the Fed's "pause in dovishness" has significantly cooled market expectations for a rate cut in January, potentially slowing the dollar's decline and weakening the upward momentum of gold and silver. Investors should be wary of the risk of a pullback from these high levels. Investors need to pay attention to further market interpretations of the Fed's decision and monitor changes in market expectations regarding the Fed's monetary policy.
In the medium to long term, if the labor market continues to cool or inflation unexpectedly declines, the conservative forecast of only one interest rate cut in 2026 will likely be revised downwards, thus opening up more room for precious metals to rise. Silver, in particular, with its dual industrial and safe-haven attributes, may see its historical high merely the beginning of a new supercycle.
In addition, attention should be paid to US trade data and changes in US initial jobless claims on this trading day.
(Spot gold daily chart, source: FX678)
At 07:53 Beijing time, spot gold was trading at $4232.98 per ounce.
Amid a weakening US dollar and US Treasury yields, spot gold quickly recovered its early losses, rebounding strongly after hitting a low of around 4182 yuan/gram, reaching a high of 4238.59 US dollars/ounce, a new high in nearly three trading days, before finally closing at 4228.47 US dollars/ounce, a daily gain of approximately 0.5%. Spot silver performed even better, breaking through and holding above the 61 US dollar mark, reaching a high of 61.92 US dollars/ounce, a new historical record, with a cumulative gain of 113% since the beginning of the year. In early Asian trading on Thursday (December 11), spot gold traded in a narrow range, currently hovering around 4230 US dollars/ounce.
Serious internal divisions: The 10-3 vote was the worst in recent years.
The Federal Reserve's decision resulted in a rare split, with 10 votes in favor and 3 against. Chicago Fed President Goolsby and Kansas City Fed President Schmid advocated keeping interest rates unchanged, while Governor Milan favored a one-off 50-basis-point rate cut.
The latest Special Economic Projections (SEP) show that the median federal funds rate will remain at 3.00% in 2025 (meaning two further 50 basis point cuts throughout the year), consistent with the September forecast; however, only one 25 basis point rate cut is planned for 2026, the same as the previous outlook. More noteworthy is that some members have raised their 2026 interest rate forecasts, and three members even believe that future rate hikes may be necessary, highlighting that the Fed's internal disagreement on the future path of easing has reached a recent high.
Powell's key takeaway from the press conference: Policy is in a good position, and further rate hikes are unlikely.
Federal Reserve Chairman Jerome Powell stated at a press conference that current interest rates are sufficient to handle a variety of economic scenarios, and the next step is "highly unlikely" to be a rate hike, which is also not in the committee's baseline scenario. He also emphasized that the committee will remain highly data-dependent and will not provide timely assessments of the policy path in January and beyond, but did not offer clear forward guidance. The market interpreted this as a "pause in dovishness": the probability of significant short-term easing has decreased, but the rate-cutting cycle is not completely over.
The statement's wording has subtly changed: the addition of "carefully assess the newly released data" suggests a wait-and-see approach.
Compared to the November statement, this statement added a new sentence: "In considering any further adjustments to the target range for the federal funds rate, the Committee will carefully assess upcoming data, the evolving outlook, and the balance of risks." This wording has historically appeared many times before a pause in rate-cutting cycles and is seen by the market as a clear signal that the Federal Reserve is about to enter a period of observation.
Latest market pricing and institutional views
The CME FedWatch tool shows that the probability of a 25 basis point rate cut in January 2025 is only 22.1%, basically unchanged from the previous day;
Interest rate futures imply a cumulative rate cut of approximately 50 basis points (two cuts) by 2026, which is significantly more dovish than the 25 basis points projected in the Fed's dot plot.
Michael Rosen, chief investment officer at Angeles Investments, pointed out that the statement highlighted "weak labor market" as the main reason for this rate cut, leading the market to speculate that the door to further easing has not been completely closed.
Uto Shinohara, senior strategist at Mesirow Currency Management, believes that the dual narratives of labor market concerns and the potential for tariffs to drive up inflation are jointly suppressing the dollar.
The Triple Drivers of Silver's Rise
Silver has risen 113% year-to-date, far exceeding gold's 35% performance, mainly due to:
1. Industrial demand continues to surge in sectors such as photovoltaics, artificial intelligence data centers, and electric vehicles;
2. Global mine supply growth has stagnated, and the remaining exploitable years have decreased to less than 20 years;
3. The U.S. government has officially included silver in its "critical minerals" list, significantly enhancing its strategic value.
Geopolitical risks continue to escalate
Russian Foreign Minister Sergey Lavrov stated that the Ukraine crisis cannot be resolved peacefully without addressing its root causes, and warned that Russia is prepared to respond to hostile actions such as troop deployments or asset seizures from Europe. US President Donald Trump publicly criticized Volodymyr Zelenskyy, urging him to "be realistic," and called for swift elections in Ukraine to end the war. Geopolitical uncertainty continues to provide potential support for precious metals.
Summary and Outlook
In the short term, the Fed's "pause in dovishness" has significantly cooled market expectations for a rate cut in January, potentially slowing the dollar's decline and weakening the upward momentum of gold and silver. Investors should be wary of the risk of a pullback from these high levels. Investors need to pay attention to further market interpretations of the Fed's decision and monitor changes in market expectations regarding the Fed's monetary policy.
In the medium to long term, if the labor market continues to cool or inflation unexpectedly declines, the conservative forecast of only one interest rate cut in 2026 will likely be revised downwards, thus opening up more room for precious metals to rise. Silver, in particular, with its dual industrial and safe-haven attributes, may see its historical high merely the beginning of a new supercycle.
In addition, attention should be paid to US trade data and changes in US initial jobless claims on this trading day.
(Spot gold daily chart, source: FX678)
At 07:53 Beijing time, spot gold was trading at $4232.98 per ounce.
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