Party’s Over: Gold Prices Plunge Over 2% as Fed Rate Cut Hopes Fade
Jakarta,โ Indonesia – A rally that saw gold prices surge over 50% this year abruptly stalled Friday, โwiht prices โคdroppingโค more than 2% as optimism surrounding further interest rate cuts by the โU.S.Federal Reserve evaporated. Despite the sharp decline, goldโข remainsโฃ above theโค key psychological threshold of US$4,000 per troyโ ounce.
The spot price of gold closed at US$4,001.78 perโ troy ounce on Friday, October 31, 2025, a 2.67% decrease for the โขweek -โค marking the second consecutive weekly loss, according to Refinitiv data. this reversal โฃfollows a period of unprecedented gains,โ with gold reaching a record high of US$4,381.21 per troy ounce โon October 20. The recent โคpullback โunderscores gold’s sensitivity โฃto shifting expectations regarding monetary policy.
The shift in sentiment stemsโ from increasingly hawkish commentary โขfrom โwithin the โFederal Reserve. Beth Hammack, President of the Federal โขReserve Bank of Cleveland, publicly opposed recent rate cuts, emphasizing the need for continued restraint in combating inflation. “Hammack is aggressively targeting gold โas he becomes the third regional Fed President to openly oppose further interest rate cuts at this stage โคgiven high inflation,” โnoted Tai Wong,an self-reliant metals trader. “Hammack will be a FOMC voter in โข2026 โand shows thatโ the market isโ too optimistic in expecting lower interest rates.”
Following Wednesday’s rate โฃcut, remarks from Fed Chairman Jerome powell further โฃdampened expectations of near-term easing. The CMEโ FedWatch tool now indicates aโ 63%โค probability of a rate cut in December, a notable drop from over 90% earlier in the week.โ Higher interest rates typically โdiminish โgold’s appeal, โฃas the non-yielding โasset becomes lessโข attractive compared to interest-bearing investments.
Despite the current โdownturn, some analysts remain bullish on gold’s long-term prospects. Morgan stanley predicts gold prices will average $4,300 โinโฃ the first half of 2026, citing โpotential catalysts such as further rate cuts, increased exchange-traded fund (ETF) inflows, central bank purchases, and ongoing economic uncertainty.
Adding to the market dynamics, former U.S. President Donald Trump announced Thursday a plannedโค reduction of tariffs on Chinese goods to 47% fromโ 57%, โฃcontingent on Beijing’s actionsโค regarding fentanyl trafficking, soybean purchases, โฃand rare earth โคexports.
