Gold Price Consolidates Just Under US$4,000 as Fed Cuts Rates

The US Federal Reserve held its seventh meeting of 2025 from Tuesday (October 28) to Wednesday (October 29) amid growing division between doves and hawks as job market growth slows and inflation concerns rise.

The central bank met analysts’ expectations by lowering the federal funds rate by 25 basis points to the 3.75 to 4 percent range. It marks the second time this year that the Fed has cut interest rates.

Interest rates haven’t been below 4 percent since September 2022.

The Federal Reserve Board of Governors was reportedly split between those concerned with preventing a further slowdown in the US labor market and those fearing the fight against inflation is far from over.

Lowering rates in turn lowers the cost of borrowing, which can provide businesses with more runway to grow their workforce. However, increasing available money supply by easing access to borrowing can also increase inflation.

September consumer price index data shows inflation rose to 3 percent for the 12 months ending in September after rising 2.9 percent over the 12 months ending in August. Despite this higher inflationary environment, a weakening labor market has become the focus of the Fed’s dual mandate of stable prices and maximum employment.

The ongoing US government shutdown has delayed the release of key economic data, including the September US jobs report, which was originally slated for publication on October 3.

Until the government funding legislation is passed, all economic reports are on hold and the Fed is essentially flying blind when it comes to planning the best course of action for the country’s economy.

Filling in the gaps, CNN said financial data firm FactSet reported that the US added 50,000 jobs in September, while the unemployment rate held steady at 4.3 percent. While economists expect a pickup in jobs this time of year when the summer ends; however, compared to last year’s 240,000 jobs, this September’s gains are significantly weaker.

“Although official employment data for September are delayed, available evidence suggests that both layoffs and hiring remain low, and that both households’ perceptions of job availability and firms’ perceptions of hiring difficulty continue to decline in this less dynamic and somewhat softer labor market,” said Fed Chair Jerome Powell.

“The downside risks to employment appear to have risen in recent months.”

At the same time as its interest rate decision, the Fed announced a stop to its quantitative tightening activities as of December 1, 2025. For the past three years, the independent government agency has been working to reduce its balance sheet from US$9 trillion in 2022 to US$6.6 trillion today.

The move comes after recent stress signals in the short-term lending markets.

The next Fed interest rate decision will come on December 10, the last Fed meeting for 2025. In his speech to reporters, Powell strongly suggested another rate cut this year is not necessarily a given.

“In the committee’s discussions at this meeting, there were strongly differing views about how to proceed in December,” he said. “A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it.”

By the end of the year, US President Donald Trump intends to announce a replacement for Powell, whose term expires in May 2026. Trump criticized the Fed and Powell in particular, saying they haven't lowered rates quickly enough.

On Monday (October 27), US Secretary of the Treasury Scott Bessent announced a shortlist of candidates to replace Powell, including Fed Governors Christopher Waller and Michelle Bowman, National Economic Council Director Kevin Hassett, former Fed Governor Kevin Warsh and BlackRock executive Rick Rieder.

The gold price rebounded nearly 2 percent to reach US$4,031.10 per ounce in the lead up to the Fed's decision, but quickly consolidated just below the US$4,000 mark shortly after. Lower interest rate environments lead to lower returns on fixed-income investments like bonds, which makes gold a more attractive investment.

Silver spiked as high as US$48.25 per ounce following the meeting, still trading near 14 year highs.

“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, waiting for policy clarity,” Eugenia Mykuliak, founder and executive director of global financial services provider B2PRIME Group, told the Investing News Network.

Looking ahead, Mykuliak expects gold to trade within a range of US$3,900 and US$4,400 in the last quarter of the year. Further rate cuts or rising geopolitical tensions could push gold prices even further.

“Into 2026, gold should maintain an upward trajectory, potentially gaining another 5 to 12 percent, as real rates decrease and central banks keep diversifying reserves,” she explained.

Equities were mixed on Wednesday, with the S&P 500 (INDEXSP:INX) down 0.56 percent to reach 6,871.47. Meanwhile, the Nasdaq-100 (INDEXNASDAQ:NDX) gained 0.21 percent to come in at 26,066, and the Dow Jones Industrial Average (INDEXDJX:DJI) was down 0.72 percent, coming to 47,530.

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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.