Gold Dips, Silver Climbs As Fed Keeps Rates Unchanged

 

Gold Dips, Silver Climbs After Fed Votes to Keep Interest Rates Steady

(Bullion News Network) – The Federal Open Market Committee (FOMC) confirmed that interest rates will remain unchanged today, falling in line with what markets expected. Gold, which traditionally moves inversely to changes in the federal funds rate, dropped on the news before staging a moderate recovery as Federal Reserve Chair Jerome Powell explained the FOMC’s reasoning at the post-decision press conference. Silver began the day in the green and climbed during the FOMC press conference. The lopsided price action drove the gold-silver ratio below 90:1 for the first time since January 22nd of this year. 

Gold dropped early in the trading day but jumped about $11 during the FOMC press conference at 2:30 PM ET to settle above $2,760/ozt. Silver also gained during the press conference, which was dominated by questions from reporters about how the Fed is preparing to respond to various policy proposals suggested by the White House. The spot price of silver tacked another $.20 onto its daily gains as Fed Chair Jerome Powell answered questions about potential uncertainty facing the U.S. economy as newly-elected President Donald Trump unleashes a flurry of executive orders. 

In its decision to keep rates unchanged at the FOMC’s first meeting of the year, the committee explained that the U.S. economy continues to move in a favorable direction, although inflation rates remain elevated above the Fed’s longstanding target of 2 percent. 

Recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated. 

Despite the FOMC’s belief that the economy is fundamentally on the right track, Fed Chair Powell emphasized that the Fed is on “no preset course” when it comes to the timing and degree of rate cuts in 2025. In 2024, safe haven assets dropped as the Fed revised its projections to reflect only two anticipated interest rate cuts in 2025. Powell once again reiterated that the FOMC remains committed to its dual mandate of stabilizing consumer prices and minimizing unemployment, and that the committee will consider a “wide range of information” regarding labor and economic conditions before revising its monetary policy. 

Questions About White House Policy Loom Large At First Fed Press Conference of 2025

As expected, many journalists’ questions following the decision centered on how the Fed is prepared to respond to a series of economic policy proposals from President Trump. In particular, several reporters asked Fed Chair Powell how President Trump’s universal tariff policies might impact the FOMC’s rate adjustments and economic outlook projections moving forward. Powell generally strayed from questions that invoked an appraisal of President Trump’s proposals, particularly those concerning the White House’s recent executive orders. 

When asked to respond to President Trump’s claims at the Davos World Economic Forum that he will demand interest rates be lowered, Powell declined to comment, saying that the FOMC is “keeping our heads down [and] doing our work.” This question – and response – set the tone for the entirety of the Q&A session; Powell remains adamant that politics will play no role in how the Fed adjusts rates over the next four years. When asked if the uncertainty surrounding President Trump’s tariff proposals will play into the Fed’s economic forecasts, Powell said that the FOMC is unable to assess the upside risks to inflation posed by the proposals until it knows “how these policies will be implemented.”

The Federal Reserve Chair, who was appointed by President Trump in 2017, also declined to explain with specifics how the Federal Reserve plans to respond to the White House’s executive orders concerning Diversity, Equity, and Inclusion (DEI). The Fed plans to review President Trump’s orders and align the central bank’s policies with the new requirements as is consistent with existing law, Powell explained. 

Ultimately, Powell reiterated that the FOMC remains in “wait and see” mode as it evaluates the evolving risks to the labor market and inflation posed by policy and macroeconomic trends. The Federal Reserve Chair also assured Americans that he does not interpret this climate as being nearly as uncertain as the one the U.S. faced in 2020 at the onset of lockdowns and the COVID-19 pandemic. 

President Donald Trump assailed the Federal Reserve’s approach to bank regulation and accused Chair Jay Powell of fumbling the fight against inflation https://t.co/hqduEIG1NR

— Bloomberg (@business) January 29, 2025

What Does Today’s Fed Decision Mean For Precious Metal Prices? 

Gold prices dipped in anticipation of the FOMC meeting today as traders braced for rates to remain unchanged to start 2025. The spot price of gold climbed during Powell’s post-decision press conference and continued to mitigate its market open losses throughout the day. Gold is now set to lose just a few dollars in the aftermath of the Fed’s decision to keep rates unchanged at its first meeting of the year. Silver prices jumped to start the day and similarly gained as Powell spoke to a group of reporters following the FOMC’s January meeting. Silver is set to end the day just $.06 below $31/0zt, continuing a winning streak for silver bulls that began on Tuesday. 

The late-day price action suggests that precious metal traders are largely undaunted by the Fed’s decision to keep rates unchanged to start the year. Much of the post-decision press conference reflected a growing sense of uncertainty that analysts say could be a major boon for precious metal prices throughout 2025. Notably, Fed Chair Powell refused to close the door to rate cuts in the near future. Instead, he reiterated that the Fed is prepared to respond to new risks in both the labor market and inflation. Economic and geopolitical uncertainty remain two of the most defining key indicators for precious metal prices, which are considered safe haven assets and tend to see increased demand during uncertain geopolitical and economic climates. 

President Trump pushed back against the FOMC’s decision in a Truth Social post shortly after the press conference concluded: 

Because Jay Powell and the Fed failed to stop the problem they created with Inflation, I will do it by unleashing American Energy production, slashing Regulation, rebalancing International Trade, and reigniting American Manufacturing, but I will do much more than stopping Inflation, I will make our Country financially, and otherwise, powerful again! The Fed has done a terrible job on Bank Regulation. Treasury is going to lead the effort to cut unnecessary Regulation, and will unleash lending for all American people and businesses. If the Fed had spent less time on DEI, gender ideology, “green” energy, and fake climate change, Inflation would never have been a problem. Instead, we suffered from the worst Inflation in the History of our Country!

The American leader confirmed to reporters last month that he will not attempt to remove Powell from his position as Chairman of the Federal Reserve. Still, President Trump has been consistent in his criticism of the central bank, which he contends is ill-equipped to accurately adjust the federal funds rate to counteract inflation. 

Precious metal price trends are notoriously difficult to predict with any degree of accuracy. Today’s price action implies that a flight to safe haven assets may still be on the horizon, as some analysts have suggested. As of January 29th, 2025, gold is up 5.3% since January 1st. Silver prices have increased 7.3% since the beginning of 2025.