Gold Stages Recovery After Fed Hints at Coming Rate Cuts
Gold markets experienced a notable turnaround after a key Federal Reserve official indicated that interest rate reductions could be imminent. The precious metal, which had been trading lower, found support following comments from New York Fed President John Williams that suggested the central bank has room to cut rates in the near term.
The shift in sentiment came during trading on November 21, 2025, when Williams delivered a speech in Santiago, Chile, pointing to changing economic conditions that could justify monetary policy easing.
Market Reaction and Probability Shifts
Following Williams' remarks, financial markets responded immediately. Bond yields declined while the U.S. dollar pared earlier gains, creating favorable conditions for gold, which typically benefits from lower interest rate environments.
Swap traders dramatically increased their expectations for a December rate cut, pricing in a 68% probability of reduction at the Fed's upcoming December 9-10 meeting. This represents a substantial increase from the approximately 35% chance estimated before Williams' speech.
The heightened expectations stem from Williams' assessment that "downside risks to employment have increased while upside risks to inflation have eased." This dual development provides the Federal Reserve with greater flexibility to consider rate reductions without triggering inflationary concerns.
Broader Context and Gold's Performance
The potential policy shift comes as Fed Chair Jerome Powell attempts to build consensus among divided policymakers. The division follows the central bank's second consecutive rate cut in October, with several officials expressing opposition or uncertainty about supporting a third straight reduction in December.
Despite pulling back from record highs reached last month, gold has gained more than 50% this year and remains on track for its strongest annual performance since 1979. The remarkable rally has been supported by multiple factors, including substantial inflows to exchange-traded funds and continued central bank purchases.
Geopolitical tensions also contributed to gold's supportive environment. Recent developments in Ukraine, where European leaders rejected key elements of a U.S.-Russia peace plan, added to the metal's appeal as a safe-haven asset.
At 11:01 a.m. in New York, gold traded at US$4,070.21 per ounce, representing a modest decline of 0.2%. Meanwhile, the Bloomberg Dollar Spot Index showed a slight increase of 0.1%. Other precious metals showed mixed performance, with silver declining 1.9% while platinum gained ground and palladium retreated.
Many market analysts view the rapid gains in the second half of the year as potentially overextended, particularly as narratives about a "debasement trade"—referring to a retreat from sovereign debt and currencies—gained traction among investors.
