Why Gold Just Took a Hit: Fed Rate Cut Hopes Cooling Down

Gold traders got a reality check on Thursday. Spot prices slipped $21.20 to $4,056.50/oz as fresh U.S. labor data dimmed December rate cut bets.

Here’s what spooked the market: September nonfarm payrolls came in hotter than expected at 119,000 jobs added (consensus was 50,000). Even though unemployment ticked up to 4.4%, the solid job gains suggest the Fed might pump the brakes on cutting rates again.

The Setup:

• Fed cut rates 25bp in late October, bringing the benchmark to 3.75%-4.00%
• December meeting odds: Only 39.4% pricing in another 25bp cut (via CME FedWatch)
• Fed Chair Powell already signaled in October: “another cut is not a foregone conclusion”

What’s Interesting: October FOMC minutes revealed the Fed is split. Two members dissented—one wanted a bigger 50bp cut, the other wanted no cut at all. The message is clear: sticky inflation and solid employment data are making policymakers cautious.

Silver got hit harder, dropping 1.07% to $50.25/oz.

The takeaway? Gold thrives in low-rate environments. If the Fed stays on pause in December, that’s actually bearish for bullion. The bond market is basically saying: “Show me weaker data first.”