Rate Cut Signals Propel Gold to New Heights As Inflation Pressures Ease

Bullish sentiment surrounding potential Federal Reserve rate cuts sent precious metals soaring on Tuesday, with gold and silver posting significant gains as market participants reassessed economic data against hawkish Fed guidance. The precious metals rally reflects growing conviction that the central bank may ease monetary policy in the coming months.

Fed Officials Lean Toward Easier Policy

The catalyst for Tuesday’s move stems from dovish remarks made by several Federal Reserve policymakers in recent days. Fed Governor Christopher Waller publicly advocated on Monday for an additional 25-basis-point rate cut at December’s policy meeting, citing manageable inflation levels and a weakening labor market. San Francisco Fed President Mary Daly echoed similar sentiment, arguing that labor market deterioration poses greater risks than current inflation dynamics. New York Fed President John Williams also signaled flexibility, noting room for near-term rate adjustments to bring benchmarks closer to neutral levels.

This policy shift has reverberated through markets. According to CME Group’s FedWatch Tool, investors are pricing in an 84.9% probability of a 25-basis-point cut at the Fed’s December 9-10 meeting—a stark reflection of how markets have recalibrated expectations.

Economic Data Supports Moderate Pricing Outlook

U.S. economic releases on Tuesday provided a mixed but generally dovish backdrop. The Bureau of Labor Statistics reported that producer prices rose 0.3% month-over-month in September—matching forecasts—following a 0.1% decline in August. Year-over-year producer price growth came in at 2.70%, indicating a stable inflationary environment despite ongoing trade tensions. Core producer prices, excluding volatile food and energy components, advanced only 0.1% from the prior month (softer than anticipated) and were up 2.9% annually.

Retail sales growth proved modest at 0.2% month-over-month for September, a significant deceleration from August’s 0.6% expansion. Meanwhile, an ADP employment report revealed that private employers shed an average of 13,500 jobs weekly over the four weeks ending November 8—a notable deterioration from the prior period’s 2,500 weekly decline. This labor market softening strengthens the case for rate relief.

Precious Metals Capture Upside as Risk Appetite Shifts

The combination of dovish Fed guidance and economic data suggesting neither runaway inflation nor robust growth prompted investors to rotate toward safe-haven assets. Front-month COMEX Gold futures for November delivery jumped $47.30, or 1.16%, to settle at $4,139.20 per troy ounce. Front-month COMEX Silver for November delivery climbed even more impressively, gaining 63.90 cents or 1.27% to $50.934 per troy ounce—demonstrating silver’s outsized sensitivity to rate cut expectations.

The Fed has already trimmed rates twice this year, but divisions remain within the central bank over the timing and magnitude of further adjustments before year-end. With an 84.9% market probability of December action and gold price momentum near 1990 levels of real concern, expectations for monetary ease have clearly solidified.

As rate-cut odds strengthen and inflation proves less intractable than feared, gold and other precious metals stand to benefit from lower real yields and diminished opportunity costs associated with holding non-yielding assets.