The Fed Passes a Half-Point Rate Cut and Gold Rallies

At 2:00 pm (Eastern time) Wednesday, September 18^th, the Federal Reserve’s Open Market Committee (FOMC) made a somewhat surprising decision to cut their key Fed funds rate by 50-basis-points (0.50%).

Most observers expected a 0.25% cut since the Fed seldom wants to look like they are in a panic mode, overreacting to current events. In truth, they should have started cutting rates earlier, as I previously noted, so this may be a “make-up” cut for not starting their rate cuts in their July 30-31 meeting. last (July 30-31) meeting.

The immediate market reaction was super-bullish for the precious metals and most stock market indexes but first reactions don’t generally mean a lot, since the market tends to digest its various reactions, up and down, over the next two or three days.

Initially, gold on the futures market rose $30, from $2,594 at 1:57 pm EST to $2,624 (+1.2%) at 2:05 p.m. EST, after the announcement was made. In the same few minutes, silver futures rose from $30.69 to $31.22 (+1.7%), partly because lower rates promote faster economic growth. Platinum rose from $973 to $986 (+1.3%). Later on, the metals retreated but this is normal behavior during any Fed press conference.

The S&P 500 shot up from 5,635 to a record high 5,689 (+1%) in a few minutes but it couldn’t hold on to that sharp peak, as some profit-takers quickly cut those gains in half.

The same trading pattern was true in the Dow Jones Industrials and NASDAQ: Up, down, up, then down.  By the end of the trading day, most of the stock market indexes were down for the day. The U.S. Dollar Index (DXY) fell but not by much (-0.5%), then it rose back to breakeven for the day.

In his post-announcement press conference, Fed Chairman Jerome Powell confirmed what most observers expected, the Fed had to focus more on keeping unemployment low, as well as making inflation fall, since those are its two equally important mandates – inflation and jobs.

There was some dissent in the decision – the first official dissent since 2005 – but it was only one person out of 19, so there was no major rebellion by the FOMC. The group called for two more cuts in 2024, with the next rate cut coming the day after the November 5 election.

As we have said for almost a year now, we align with Steve Forbes, who we met with in October 2024 – that gold would reach $2,500 this year (a “done deal” now) and much higher if “the wrong team wins” in November.

Right now, the mainstream media seems to be promoting Kamala Harris, asking her no tough questions, giving her a pass on avoiding formal press conferences on all issues, but especially on policy or the country’s direction. The press has also allowed Harris to avoid any scrutiny of weak economic plans and “word salad” answers to softball questions about a new vision (that apparently only she can see) for a prosperous future.

So, we could see a major boost for gold if the Democrats win on November 5^th and the Fed cuts rates another half-point on the day after the election, never minding the massive continuing deficit spending.

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Mike Fuljenz, president of Universal Coin and Bullion, taught classes on grading and counterfeit coin detection for over 20 years. He has also assisted the Texas Attorney General with drafting consumer alerts on coins and on counterfeits. He has lectured and conducted training for law enforcement with the Numismatic Crime Information Center. He has been a member of the National Anti-Counterfeiting Task Force, as well as assisting the Federal Trade Commission with their consumer alerts on coins.