Fed cuts rates to 3-year low, Gold climbs above $4,200

Fed Cuts Rates as Dissent Grows Inside the Central Bank

For the third time in 2025, the Federal Reserve slashed interest rates by a quarter point, bringing the benchmark rate down to 3.50-3.75%, a 3-year low. The dissents on the Fed board continues to grow as two members voted to keep rates steady and a third voted to cut rates by a half of a percentage point in a 9-3 vote on Wednesday.

Market Reacts

Gold traded above $4,200 an ounce after the Fed’s decision and silver trades near its new all-time high at $61.31. Stocks gained modestly and Treasury yields declined on the news.

Big picture? The Fed remains between a rock and hard place. Board members made today’s decision despite big blind spots about the state of the economy in the wake of government-shutdown delayed economic reports. And the Fed board is torn between the conflicting forces of stubbornly high inflation and a weakening labor market.

Tough Choices: Jobs and Inflation

The Fed has been trying to walk a tight walk this year. Why? Because interest rate cuts can help strengthen a weakening jobs market, but rate cuts also increase inflation.

Fed Chairman Jerome Powell admitted today in typical Fed-speak understatement that the two goals of the Fed (to promote maximum employment and stable prices) are “a bit in tension.”

Future Rate Cuts Are Cloudy

Looking into the crystal ball for 2026, given the current uncertainty over the actual state of the jobs market and inflation given the delayed government data, Powell also said that he doesn’t think a rate hike is anybody’s base case for the next policy move. The Fed Board’s median projection for 2026 includes just one quarter-point rate cut.

Gold and Silver: Top Performing Assets in 2025

In the midst of the uncertainty, gold and silver stand out as two of the best-performing assets of the year. Gold has chalked up gains of over 60% and silver has nearly doubled in value with a 97% gain. Precious metals are still climbing with new record highs forecast at $5,000 in 2026 for gold and at $65 for silver.

Investors are turning to gold amid a world filled with geopolitical instability, macroeconomic uncertainty, upside risks to inflation, runaway government debt, a weakening U.S. dollar, and concerns that an unsustainable AI-bubble is fueling recent stock market gains.

In the third quarter of this year, Harvard, the world’s largest endowment fund, increased its exposure to gold, totaling over $235 million now. In the midst of rising prices, major institutional investors, hedge funds, high net worth individuals, and everyday Americans are still increasing their allocation to the safety of both gold and silver.

Navigating 2026 Headwinds: Gold and Silver Provide Safety

As we move into a New Year, take the time to explore if your current allocations match your risk tolerance levels. Indeed, today’s risk for investors may be that you are not holding enough precious metals. In a world filled with instability, gold and silver provide the certainty and security of a 5,000-year track record of building wealth. If you’d like a personalized recommendation for your portfolio, Blanchard stands ready to assist. Give us a call today.