Powell’s Rate Cut Explainer Sends Gold Near $3,800

Federal Reserve Chair Jerome Powell took the podium in Warwick, Rhode Island on September 23rd to explain why policymakers trimmed the federal funds target another 25 basis points last week. Speaking to the Greater Providence Chamber of Commerce, Powell said the new 4.00–4.25 percent range moves policy “toward a more neutral stance.” Yet in the very next breath he warned that near-term risks now lean “to the upside” for inflation and “to the downside” for employment—an admission that, even after eleven cuts since early 2024, the central bank might still be fighting yesterday’s war. Markets heard the mixed message loud and clear: while the S&P 500 wobbled, spot gold notched an intraday high of $3,785, barely $15 shy of a fresh record.

Growth already shows fatigue. Real GDP expanded just 1.5 percent annualized in the first half of 2025, down from 2.5 percent in 2024, as consumers tapped the brakes and housing stayed in a funk. Business outlays for equipment and intangibles have perked up, but companies added an average of only 29,000 jobs per month over the past three months—well below the roughly 70,000 needed to hold the unemployment rate steady. August’s jobless rate edged up to 4.3 percent, yet the ratio of job openings to unemployed workers hovers near one-to-one, hinting that many firms remain reluctant to commit to new full-time hires.

The inflation picture looks equally murky. Total PCE (Personal Consumption Expenditures) inflation clocked in at 2.7 percent year-over-year in August, with the core measure at 2.9 percent—both higher than a year ago. Powell blamed the acceleration on “one-time” goods-price jumps tied to tariffs, implying the bump will “unfold over several quarters” before fading. Nonetheless, he felt compelled to reassure listeners that the Fed “will carefully assess and manage the risk of higher and more persistent inflation,” a tacit acknowledgment that temporary shocks have a habit of outstaying their welcome. Consumer and business confidence, still scarred by the financial crisis and the pandemic, remains well below pre-spring levels, and September’s Beige Book flagged policy uncertainty as a key drag on investment.…