Federal Reserve QE signals released, the US dollar faces long-term pressure, and precious metals usher in a new wave of momentum.

Policy Shift Triggers Asset Revaluation

On December 10th, Eastern Time, the Federal Reserve announced its latest monetary policy decision, lowering the benchmark interest rate by 25 basis points to a range of 3.50%-3.75%. At the same time, the regulatory authority announced the launch of a short-term government bond purchase plan starting December 12th, with a scale of $40 billion, and will maintain the pace of bond purchases in the coming months. This move is widely interpreted by the market as a signal of the restart of quantitative easing (QE).

More notably, Federal Reserve Chair Jerome Powell showed a relatively dovish stance in his post-meeting statement, with language more accommodative than market expectations, further boosting investors’ risk appetite.

US Dollar Index Plummets, Precious Metals Rise

Market reactions to the policy signals were very swift. The US Dollar Index dropped more than 0.6% on the day of the decision announcement and continued to weaken. As of December 11th, the US Dollar Index had fallen to 98.53, hitting its lowest point in over a month.

In tandem with the dollar, precious metals such as gold and silver experienced significant gains after the policy confirmation. This reflects a shift in investor expectations toward a weaker dollar environment and a reassessment of the hedging value of physical assets.

Only One Rate Cut in 2026, Diverging Monetary Policy Outlook

The latest dot plot released by the Federal Reserve shows a key signal: by the end of 2026, the median forecast for the federal funds rate remains unchanged at 3.4%. This suggests that the pace of rate cuts next year will slow significantly, with only one 25 bps cut expected for the entire year, far below the market’s previous expectation of two rate cuts.

Although the pace of rate cuts slows, amid the gradually diverging monetary policy stances of global central banks, the dollar still faces medium-term depreciation pressure. As macro strategy analyst Edward Harrison stated: “As the divergence in policy approaches between the Federal Reserve and other central banks widens, the dollar’s trend should be understood from the perspective of bond yields and international interest rate differentials. A weakening dollar trend is unlikely to reverse.”

Bullish Space for Precious Metals Still Exists

The outlook for gold remains generally optimistic. Charu Chanana, Chief Investment Strategist at Saxo Bank, pointed out multiple factors supporting gold’s rise: expanding government fiscal deficits creating long-term inflation expectations, complex geopolitical situations boosting demand for safe assets, the ongoing de-dollarization process worldwide, and central banks continuing to increase their gold reserves. These factors combined indicate that the current cycle of precious metals’ rise still has room for further gains.