Party’s Over: Gold Prices Plunge Over 2% as Fed Rate Cut Hopes Fade
Jakarta, Indonesia – A rally that saw gold prices surge over 50% this year abruptly stalled Friday, wiht prices dropping more than 2% as optimism surrounding further interest rate cuts by the U.S.Federal Reserve evaporated. Despite the sharp decline, gold remains above the key psychological threshold of US$4,000 per troy ounce.
The spot price of gold closed at US$4,001.78 per troy ounce on Friday, October 31, 2025, a 2.67% decrease for the week - marking the second consecutive weekly loss, according to Refinitiv data. this reversal follows a period of unprecedented gains, with gold reaching a record high of US$4,381.21 per troy ounce on October 20. The recent pullback underscores gold’s sensitivity to shifting expectations regarding monetary policy.
The shift in sentiment stems from increasingly hawkish commentary from within the Federal Reserve. Beth Hammack, President of the Federal Reserve Bank of Cleveland, publicly opposed recent rate cuts, emphasizing the need for continued restraint in combating inflation. “Hammack is aggressively targeting gold as he becomes the third regional Fed President to openly oppose further interest rate cuts at this stage given high inflation,” noted Tai Wong,an self-reliant metals trader. “Hammack will be a FOMC voter in 2026 and shows that the market is too optimistic in expecting lower interest rates.”
Following Wednesday’s rate cut, remarks from Fed Chairman Jerome powell further dampened expectations of near-term easing. The CME FedWatch tool now indicates a 63% probability of a rate cut in December, a notable drop from over 90% earlier in the week. Higher interest rates typically diminish gold’s appeal, as the non-yielding asset becomes less attractive compared to interest-bearing investments.
Despite the current downturn, some analysts remain bullish on gold’s long-term prospects. Morgan stanley predicts gold prices will average $4,300 in the first half of 2026, citing potential 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 planned reduction of tariffs on Chinese goods to 47% from 57%, contingent on Beijing’s actions regarding fentanyl trafficking, soybean purchases, and rare earth exports.