Gold Price Dips as Fed Leaves Rates Steady to Start New Year

New policy doesn't play into Fed decision making

Leading up to the meeting, it was widely expected that the committee would maintain rates as it considered the effects of new policy from the incoming Trump administration on the overall economy.

Some of the President's early orders have already created chaos, domestically and abroad. He instructed the start of mass deportations across the country, threatened tariffs on Colombia, and continued to discuss economic action on Canada, Mexico, and Denmark.

A trade war between the US and G7 allies could have a wide-ranging destabilizing effect on the global economy and could trigger a new rise in inflation.

However, Chairman Powell remained neutral in his statements, indicating a focus on long-range data rather than short-term data derived from that information. He noted some anecdotal evidence that immigration policy affected some businesses but said there is a lack of data on its effect on the labor market.

“We need to let those policies be articulated before we can even begin to make a plausible assessment of what their implications for the economy will be. So we're going to be watching carefully, and as we always do, this is no different than any other set of policy changes,” Powell said when pressed specifically on how tariffs and other initiatives could affect future decisions.

North of the border, the Bank of Canada (BoC) made the decision to lower its rate by 25 basis points to 3 percent. It gave no indication the cut was in anticipation of incoming US tariffs on Canadian goods, which could come into effect as early as February 1.

BoC President Tiff Macklem said that tariffs were on the top of his mind, but also indicated there was little the central bank could do through its monetary policy decisions to offset them.

The Federal Reserve’s decision had minimal impact on equity markets, which remained quite volatile this week following selloffs prompted by AI announcements from the Chinese startup DeepSeek and retail giant Alibaba (NYSE:BABA).

Following the Fed decision, the S&P 500 (INDEXSP:.INX) was hovering around 6,039 points for a 0.5 percent loss on the day. The Nasdaq-100 (INDEXNASDAQ:NDX) saw a 0.02 percent gain to 21,468, and the Dow Jones Industrial Average (INDEXDJX:.DJI) was down 0.29 percent to 44,720.

Likewise, precious metals markets were muted with gold seeing a decline of 0.3 percent to US$2,754 and silver seeing a marginal gain of just over 1 percent to US$30.72.