Gold Soars As Markets Analyze Fed's Decision Following Rate Cut

(RTTNews) - Gold prices surged on Monday, rebounding from yesterday's slide, as traders assimilated Wednesday's rate cut decision by the U.S. Federal Reserve and parsed both remarks by the Fed Chair as well as the summary of economic projections.

Front Month Comex Gold for December delivery climbed sharply by $89.10 (or 2.12%) to $4,285.50 per troy ounce.

Front Month Comex Silver for December delivery catapulted by $3.5500 (or 5.88%) to $63.929 per troy ounce. Notably, this is a new record high for silver, which has been up for three consecutive sessions.

Yesterday, the U.S. Federal Reserve reduced interest rates by 25 basis points bringing it to the 3.50%-3.75% range.

As markets already priced in this reduction as a given, attention shifted to Fed Chair Jerome Powell's speech and the economic projections by the central bank.

The central bank's latest Summary of Economic Projections showed significant divisions within the Fed. The forecast for 2026 hinted at just one more quarter-point cut.

Among the 12 members of Fed, Governor Stephen Miran preferred a 50-basis-point cut while Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid wanted to leave rates unchanged.

Usually, lower interest rates support gold prices since the metal does not offer any yield. Hence, the opportunity costs for holding gold goes down when rates are lowered.

However, silver prices get an added layer of benefit due to silver's demand for industrial applications.

U.S. President Donald Trump expressed displeasure at the rate cut and insisted that it should have been "at least doubled." Trump wants to bring the borrowing costs in the U.S. as the lowest in the world.

On the economic front, the U.S. Labor Department data today revealed that for the period ending December 6, the initial jobless claims climbed by 44,000 from the previous week to 236,000.

For the week ending November 29, continuing jobless claims declined to 1,838,000, down from a downwardly revised 1,937,000 in the prior week.

The BEA data revealed a trade deficit of $52.8 billion in September, (the lowest since June 2020) compared to a $59.3 billion gap in August.

While exports of goods and services jumped 3% to $289.3 billion in September, imports of goods and services edged up 0.6% to $342.1 billion.

On the geopolitical front, the Russia-Ukraine war is deep in its fourth year now.

Criticizing it for being too tilted in Russia's favor, Ukrainian President Volodymyr Zelenskyy rejected the U.S. peace proposal aimed to end the Russia-Ukraine conflict.

Ukraine-friendly European nations warned Ukraine to resist attempts by the U.S. to force Ukraine to cede territories to Russia.

Zelenskyy stated that he would submit a revised plan to the U.S. negotiators clearly stating what Ukraine wants.

Trump announced that he had exchanged "pretty strong words" during his conversation with European leaders on the peace plan.

Trump also emphasized that Zelenskyy should be realistic about Ukraine's current position. Experts interpret Trump's comments as a marked shift in the U.S. position, which is becoming more Russia-friendly.

The ongoing hostility between the U.S. and Venezuela took another dimension after U.S. seized a Venezuelan oil tanker off the Venezuelan coast.

In response, Venezuela accused the U.S. of "theft" and "international piracy."

The U.S. is building its military presence around Venezuela as it says it needs to combat the narco trafficking promoted by Venezuelan President Nicolas Maduro. Maduro ignored this accusation and counter-alleged that the Trump administration's merely wants to exploit their oil reserves.

However, Venezuela's opposition leader Maria Corina Machada, a Nobel Laureate, who has escaped to Norway has called Trump's actions "decisive."

The U.S. dollar index was last seen trading at 98.20, down by 0.58 (or 0.59%) today.

Continuing geopolitical tensions, the impact of U.S. tariff war, uncertainty in global economy, and rising unemployment have been aiding the yellow metal.