Gold prices increased by nearly 0.50% following the Federal Reserve’s rate cut of 25 basis points, meeting expectations. The decision was met with a split vote of 9 to 3, indicating policy uncertainty, and Gold (XAU/USD) was trading at $4,227, up from daily lows of $4,182.
The monetary policy statement addressed employment risks and continued inflation pressures. US Treasury yields fell, with the 10-year note rate dropping to 4.155%, while US real yields declined to 1.895%, supporting bullion. The US Dollar Index decreased by 0.58% to 98.65, impacting gold prices.
Jerome Powell Remarks
Fed Chair Jerome Powell stated that the Fed is “well positioned” to observe the economy after 75 basis points of easing this year. He also mentioned that the Fed funds rate is within the neutral range, expecting it to reach around 3.4% next year. Beyond 2028, Fed policymakers predict neutral rates at about 3%.
Gold has long been a store of value and a safe-haven asset. Central banks are significant holders, buying 1,136 tonnes worth around $70 billion in 2022. Gold prices have an inverse relationship with the US Dollar and Treasuries, rising with fears of recession or geopolitical instability. As a yield-less asset, gold benefits from lower interest rates but struggles with higher rates.
The Federal Reserve’s decision to cut rates was expected, but the 9-to-3 split vote reveals a deep uncertainty we must now trade. This division pits fears of a weakening job market against persistent inflation, which the latest November 2025 CPI report showed is still sticky at 3.2%. With recent payroll data showing job growth slowing to just 95,000, the Fed is caught in a difficult position.
For now, the path of least resistance for gold is higher, as falling Treasury yields and a weaker dollar provide strong tailwinds. With the 10-year yield at 4.155%, non-yielding gold becomes much more attractive. We see this as an opportunity for near-term call options on gold, anticipating that the market will focus more on the risk of a recession than on inflation.
Market Hedge Considerations
However, we must protect against a sharp reversal if the hawks at the Fed regain control. The statement’s emphasis on high inflation is a clear warning that another hot inflation print could quickly reverse this week’s policy move. Cautious traders should consider buying put options with a strike price below the $4,200 level as a hedge against this very real risk.
Given the divided policy board and neutral outlook, we expect significant volatility in the coming weeks. Chairman Powell’s “wait and see” approach means that every piece of incoming economic data will likely cause sharp swings in the market. This environment is less suited for strong directional bets and more for strategies like straddles, which can profit from large price moves in either direction.
We only need to look back to the market whiplash of 2023 and 2024 to see how quickly sentiment can shift based on central bank guidance. The current setup feels very similar, suggesting any positions should be managed with caution. The split vote is a signal that predictability is low, and traders should adjust their risk accordingly.
