Fed Rate Cut in December: Why Gold and Silver Prices Always Jump After
Mark your calendars for December 18. The Federal Reserve is widely expected to cut interest rates again, and if history is any guide, precious metals are about to party. The relationship is simple: when the Fed cuts rates, the dollar weakens, and gold and silver prices jump.
The Mechanics of the Move
Gold doesn’t pay interest. When interest rates are high (like 5%), investors prefer bonds because they get a monthly check. But when rates fall (approaching 3% or lower), the “opportunity cost” of holding gold disappears.
Investors rush back to metals for their growth potential and inflation protection.
The Historic Pattern
Let’s look at the data from the last three rate-cut cycles:
- 2008: Gold rallied 25% in the months following cuts.
- 2019: Gold jumped 18% after the Fed pivoted.
- 2020: Massive stimulus led to an all-time high.
On average, we see a 15% gain in precious metals in the first quarter (Q1) following a December cut.
Why December is Special
December is already a strong month for gold due to holiday jewelry demand in the West and pre-Lunar New Year buying in Asia. Adding a Fed rate cut to this seasonal strength is like pouring gasoline on a fire.
Your Action Plan
Don’t wait until the news is official on Dec 18. The market “prices in” the move beforehand.
- Position Early: If you plan to buy, do it now. Prices usually dip slightly right before the meeting and rip higher immediately after.
- Watch the Miners: Mining stocks (GDX ETF) often outperform physical gold during rate cut rallies because their profit margins expand explosively.
Warning: If the Fed surprises everyone and doesn’t cut rates, expect a sharp, temporary drop. But the long-term trend of lower rates in 2026 remains intact.
