In a pivotal two-day meeting held from October 28 to 29, the U.S. Federal Reserve announced its second rate cut of 2025, reducing the federal funds rate by 25 basis points to a new range of 3.75%–4.00%. The move, while widely expected, underscores the central bank’s delicate balancing act between sustaining a softening labor market and keeping inflation under control.
A Divided Federal Reserve Faces a Foggy Economic Outlook
This decision marked the first time since 2022 that U.S. interest rates have fallen below 4%, signaling a modest easing in monetary policy. Yet, the tone from within the Fed was far from unified. Policymakers remain sharply divided: the doves worry about a cooling job market, while the hawks fear loosening too soon could rekindle inflationary pressures.
Federal Reserve Chair Jerome Powell acknowledged the complexity of the situation:
“Although official employment data for September are delayed, available evidence suggests that both layoffs and hiring remain low … The downside risks to employment appear to have risen in recent months.”
The Fed’s dual mandate—maintaining price stability and maximizing employment—has been complicated by limited data availability. A prolonged U.S. government shutdown has stalled the release of key economic indicators, including the September jobs report, forcing policymakers to rely on private-sector estimates and fragmented signals.
According to FactSet, the U.S. economy added just 50,000 jobs in September, a sharp decline from the 240,000 added during the same period last year. The unemployment rate held steady at 4.3%, but overall job creation appears to be losing steam.
Inflation and Market Reactions
Inflation, measured by the Consumer Price Index, ticked up slightly to 3.0% year-over-year in September from 2.9% in August. While still well below the post-pandemic highs, the uptick reflects continued upward pressure on prices, particularly in energy and housing.
To further stabilize markets, the Fed announced it would end its three-year quantitative tightening program on December 1, 2025, halting the reduction of its balance sheet at roughly $6.6 trillion, down from $9 trillion in 2022. The decision follows signs of liquidity stress in short-term lending markets—a red flag reminiscent of the 2019 repo crisis.
Market Response: Gold and Silver Surge as Equities Falter
Gold prices rallied nearly 2% to $4,031.10 per ounce ahead of the Fed’s announcement before consolidating just below $4,000. The rate cut reaffirmed gold’s appeal as a hedge against monetary easing and declining real yields.
Silver followed suit, spiking to $48.25 per ounce, hovering near 14-year highs as investors sought refuge from currency volatility and potential inflation acceleration.
“On the eve of the Fed meeting and Chair Powell’s remarks, gold has rebounded nearly 2 percent, showing how quickly the market switches between profit-taking and bargain-hunting,” observed Eugenia Mykuliak, founder of global financial services firm B2PRIME Group.
Mykuliak anticipates gold trading between $3,900 and $4,400 through year-end, with potential upside if further rate cuts or geopolitical shocks occur. Looking into 2026, she projects gold could rise another 5–12% as central banks diversify reserves and real interest rates remain low.
Equities, meanwhile, responded with mixed results. The S&P 500 slipped 0.56%, the Dow Jones Industrial Average dropped 0.72%, and the Nasdaq-100 managed a modest 0.21% gain—an indication of investor uncertainty about the Fed’s long-term policy trajectory.
Leadership Change Looms Over the Federal Reserve
Adding another layer of uncertainty, President Donald Trump is preparing to nominate a successor to Jerome Powell, whose term expires in May 2026. Among the candidates under consideration are Fed Governors Christopher Waller and Michelle Bowman, National Economic Council Director Kevin Hassett, former Fed Governor Kevin Warsh, and BlackRock executive Rick Rieder.
Trump has repeatedly criticized the Fed for being too slow to lower rates, suggesting his next appointment could shift the institution toward a more accommodative stance—potentially reshaping U.S. monetary policy for years to come.
The Road Ahead: Fragile Confidence and Precious Metal Strength
The Fed’s next meeting on December 10 will be the final policy session of 2025, and Powell has made clear that another rate cut is not guaranteed. With data still missing, political pressure rising, and inflation proving sticky, the central bank faces an increasingly narrow path.
For investors, however, one message is emerging clearly: in an environment of economic uncertainty, political turnover, and shifting monetary tides, precious metals remain among the few reliable stores of value.
At Royal Leo Holdings, these developments reinforce a long-standing view—that disciplined diversification into real assets like gold and silver is essential protection against policy volatility and fiat currency risk.
