Fed cuts rates, gold bounces higher after election dip

Fed Cuts Interest Rates for Second Time in 2024

As expected, the Federal Reserve delivered its second interest rate cut of 2024 on Thursday. The central bankers updated their policy statement saying: “The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance.” The Fed cut its key interest rate by 0.25 percentage points to 4.50-4.75%.

How did markets react? Gold traded $32.50 higher Thursday afternoon at $2,703.30. Silver also traded higher on the day, up .74 at $32.03. The stock market generally rose in lackluster trading, Treasury yields fell, and the U.S. dollar slid lower.

What about the election? Reporters asked Federal Reserve Chair Jerome Powell about the elephant in the room: will Donald Trump’s election victory shape future Fed decisions? At the post-meeting press conference, Fed Chair Powell pushed back on those ideas.

Powell said the election will have “no effect” on the Fed’s policy decisions near term. “Many things affect the economy,” Powell told reporters. “We don’t guess, speculate or assume” what the potential economic impact of what the next administration could be.

What could lie ahead? On Thursday, the central bankers were essentially following through on the interest rate cut they signaled at their September meeting. But economists are warning the future interest rate cuts may not be as speedy or deep as previously expected. Some of President-elect Trump’s policies like rising tariffs could potentially reignite inflation. According to a recent Barron’s Big Money Poll, the resurgence of inflation was the number one risk over the next six months.

Recent economic reports have shown red flags. The October jobs report revealed only 12,000 new jobs last month, well below expectations for 105,000 jobs created. The most recent inflation data shows higher prices are still sticking around – especially when you factor in food and gas. The Fed’s preferred inflation gauge, the personal consumption expenditure (PCE) rate, revealed a 2.7% annual increase in September.

What does this mean for gold? Investors swiftly bought the election dip in gold and precious metals are climbing on Thursday afternoon. Gold and silver are turning out double-digit gains in 2024 as investors turn to the safety and security of precious metals. With new questions on the horizon about the potential resurgence on inflation, gold will continue to have the wind at its back.

Gold broke through the $2,700 an ounce barrier to a new record high for the first time ever recently. The number of firms that now project gold gains to $3,000 an ounce are too many to count.

Gold’s role as currency and an asset to protect, preserve and grow your wealth has lasted for centuries and shows no signs of losing its appeal. If you have been thinking about increasing your allocation to gold, there’s never been a better time. It’s easy to increase your wealth protection, why not do it today?

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