Gold and Silver Down Amid More Rate Cut Turmoil

 

Gold and Silver Down Amid More Rate Cut Turmoil

(Bullion News Network) – Precious metal prices pulled back on Friday as expectations for an interest rate cut in December surged. The spot price of gold shed around $11 per troy ounce. Silver prices retreated by around $0.60, challenging the $50/ozt support. The price action favored gold, driving the gold-silver ratio nearly one point higher to over 81:1. Platinum and palladium moved minimally and in opposite directions, with platinum gaining over $4 per troy ounce and silver pulling back by around $1/ozt. 

CME FedWatch’s projected probability that the Fed will opt for a third consecutive rate cut at its December meeting climbed to 69.5% on Friday, up from 39% on Thursday and 44.4% on November 14th. The adjustment comes on the heels of comments from New York Federal Reserve President John Williams, who told reporters on Friday that there may be “room for further adjustment” to the Federal Reserve’s interest rate targets: 

I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral.

Williams qualified his dovish stance by saying that he believes tariffs from the White House have made it more difficult for the Fed to achieve its longstanding 2% inflation goal. According to Williams, U.S. President Donald Trump’s tariffs may be adding anywhere from 0.5% to 0.75% to the overall national inflation rate. Williams, who serves as vice chairman on the Fed’s Federal Open Market Committee (FOMC), believes that inflation may begin to pull back in 2026, which could boost the outlook for more rate cuts in the future. 

Another comment driving rate cut odds came from Federal Reserve Governor Stephen Miran. Miran told reporters that he would vote to cut rates for 25 basis points if he were the deciding vote, rather than the 50-point cut he prefers. Miran voted for cutting rates by 25 basis points at the FOMC’s October meeting. He was the only voting member of the Federal Reserve to advocate for such a large rate cut. Miran’s willingness to vote for a 25-point cut bodes well for the odds of a December rate cut, since his dissent could make it more difficult for the FOMC to find consensus on a final vote.

Rate cut odds fell to a one-month low on Thursday after a new U.S. employment report showed that the labor market may be improving. The United States added 119,000 jobs in September, far higher than the median forecast of just 50,000 jobs. The unemployment rate jumped to a recent high, but rate cut expectations pulled back on the fresh employment data, which was delayed during the government shutdown in October. The Federal Reserve’s decision to cut rates in both September and October was motivated by a cooling in the U.S. jobs market, so Thursday’s favorable data dampened those hopes, pulling precious metal prices down in the process.

These comments from two prominent voters on the FOMC drove market expectations for a December rate cut sharply higher. Precious metals like gold and silver retreated on the news, extending Thursday’s losses in both markets as traders priced in a more likely FOMC rate cut. Market anticipation surrounding the bankers’ comments helped gold and silver cut into some of their earlier losses, with both metals gaining traction later in the evening as traders priced in a more likely December interest rate reduction.

Next week will be a short one for traders, with no data releases scheduled for Monday and markets closing for Thanksgiving on Thursday, November 27th. The next major data report will come on December 5th with the preliminary December consumer sentiment index. Gold and silver are both set to end the week in the red after the latest comments from Federal Reserve officials drove the probability of a December rate cut higher.