Precious Metals Drop After No-Cut Fed Decision

 

Gold, Silver Down As Fed Votes To Keep Rates Unchanged

(Bullion News Network) – The spot price of gold dropped on Wednesday, pulling back by over $60 per troy ounce. This comes on the heels of two consecutive gains for the precious metal to begin the week. Silver moved in lockstep with gold, losing around $0.60/ozt to fall below $33 per troy ounce. The day’s price action slightly favored gold, driving the gold-silver ratio .39 points higher to a two-week high of 103.67:1. Headlining the news Wednesday was the Federal Reserve’s May meeting. The FOMC fell in line with market expectations, opting to keep the federal funds rate unchanged at 4.25-4.50%. Gold and silver prices declined steadily throughout the day before dropping quickly as the FOMC released its no-cut decision.

Federal Reserve Chair Powell’s commentary in the post-meeting press conference struck a tone of uncertainty, mirroring reports from industry leaders looking for clarity during a historically unclear economic climate. A historic slate of tariffs and an ongoing trade war with China have injected “so much uncertainty” into American markets, Powell told reporters, that the central bank is “not at all clear” on how – and when – to adjust monetary policy. Chair Powell still believes that the economy is growing at a solid rate, despite mentioning a dour GDP report from late April which left markets briefly reeling. The FOMC’s chief concern at this point is that the Trump administration’s tariffs may place the Fed’s objectives of stabilizing prices and maximizing employment in tension.

We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension. If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close. For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance.

Although Powell avoided questions concerning his relationship with President Donald Trump, the U.S. leader’s public criticism of the central bank head remains rocky at best. Last month, markets retreated after a Truth Social post by President Trump in which the leader advocated for a preemptive rate cut before suggesting that he might attempt to fire Powell from his position at the Federal Reserve. Trump later said that he has no plans to remove Powell, whose tenure began during Trump’s first term in 2018. During Wednesday’s press conference, Powell said that he does not believe that preemptive cuts are an appropriate response. Instead, the FOMC intends to employ a “wait and see” approach to revising monetary policy heading into the second half of 2025.

As Powell mentioned, the precise impact of Trump’s tariffs, particularly on China, is not yet clear in the economic data. The U.S. and China are expected to begin trade talks this week in the latest effort to de-escalate the growing trade war between the world’s two largest economies. Trump’s comments leading up to these talks may have tempered traders’ expectations for a quick resolution of what economists say could be a very costly war. Today, President Trump reaffirmed an earlier claim that his administration will not offer to lower tariffs to incentivize talks between the U.S. and China. The uncertainty surrounding this ongoing trade war has been a major driver of safe haven demand throughout 2025, which pushed gold to multiple all-time highs as traders looked for clarity. 

Friday features a parade of speeches from the Federal Reserve, including governors and presidents from several of the Federal Reserve system’s subsidiary banks. These commentaries may shed a bit more light on the U.S. economic situation after the FOMC’s latest meeting. Next week, a full slate of economic data reports will give traders fresh insight into the direction the economy may be heading. The week of data reports begins on Tuesday with the April Consumer Price Index (CPI), one of the Fed’s two core measures of inflation and consumer prices. After a speech by San Francisco Fed President Mary Daly on Wednesday, traders on Thursday will be able to read the April Producer Price Index, another key economic gauge that can help the Fed monitor the economic health of the United States.

Complicating the climate for safe haven assets further is the wide range of global geopolitical stressors, which can sometimes drive traders to historically safe assets like gold and silver. Wars in both Ukraine and Gaza show few signs of slowing down, and this week saw new escalations in the ongoing dispute between India and Pakistan, which began with a terrorist attack in Kashmir last month. According to Pakistan’s military, an Indian airstrike on Pakistan on Tuesday left 31 people dead, and Pakistani military officials have pledged to respond. This conflict occurs within the context of decades of territorial disputes between the two nuclear-armed nations, both of which claim sovereignty in Kashmir.

Despite today’s drop, gold is still up by over $50/ozt since Monday’s closing price. Silver prices are marginally up on the week, closing Wednesday a few cents higher than Monday’s price. The gold-silver ratio remains elevated at over 103.5:1 and is similarly up on the week. With a combination of U.S. economic questions and geopolitical stressors still up in the air, traders are bracing for another news-heavy week of price action in the precious metals market.