Markets Breathe Easier After Fed Minutes. Gold Doesn’t. What Gives?

Markets looked relieved after minutes from September’s Fed meeting held no surprises, but gold looks poised to break lower. What’s going on?

• Treasury yields briefly hit 24-year highs ahead of September’s FOMC meeting minutes, then retreated after the release
• Gold slipped below its one-week range floor, seemingly opening the door to a test below $4,000
• Markets and the Fed agree on a December rate hike but remain 50bps apart on what will happen in 2027

Minutes from the Federal Reserve’s September meeting offered few surprises, and much of the market seemed relieved. Treasury yields jumped to levels unseen in 24 years heading into the release and a 10-year Treasury note auction. Bond prices spiked lower, then recovered. Traders seemed to have braced for something scarier and didn’t get it.

Stocks held up too. The S&P 500 dipped back into its prior range intraday but recovered to hold the bounds of this week’s breakout to record highs. The tech-heavy Nasdaq 100 likewise erased most of its losses, finishing the day within a hair of the prior day’s peak.

Gold told a different story. A retreat in yields might have been expected to offer some relief to the non-interest-bearing metal. Instead, gold slipped below the floor of week-old range and failed to reclaim it on a retest, opening the door to a possible extension lower to test below $4,000/oz. 

The US dollar was mixed. It rose against the euro as the yield spread between French and German 10-year government debt widened back to about 140bps, near last week’s peak, after narrowing to around 130bps. That move seems to reflect renewed European sovereign bond stress. Other major currencies held up better, with the Australian dollar outperforming among the greenback’s top counterparts.

The Fed minutes held no surprises

The Fed meeting minutes fit neatly with the projections that officials released last month. All participants agreed the hike delivered at that gathering was needed, and most thought another would be appropriate by year-end. Almost all of them judged that risks to the labor market had diminished, and even saw the hiring picture as having strengthened somewhat. Needless to say, that assessment came before last Friday’s weak payrolls report. On inflation, officials saw risks skewed to the upside, making a higher rate path the prudent risk-management choice. Fed staff do not expect inflation to return to the 2% target until 2029.

The dot plot shows strong consensus. Only two policymakers favored holding rates steady this year, while everyone else saw one or two hikes. For 2027, an overwhelming majority sees no further hikes, and the four who differ lean toward cuts. By 2028, most officials expect to be cutting rates. By 2029, all of them do.

Markets took the readout as confirmation of the path for the rest of 2026. Fed funds futures put the odds of no change in October at about 83%, and of a 25bps hike in December at 96%. A gap the opens up next year. Traders still see a 96.7% chance of a hike by March and roughly 91% odds of another by the third quarter. The Fed sees rates peaking this year and holding steady in 2027, putting a 50bp wedge between traders and policy officials.

Who’s right about 2027, the markets or the Fed?

The latest data lean toward the Fed. Three-month annualized inflation in the personal consumption expenditures (PCE) price index, the Fed’s preferred gauge, has reached the 2% target after trending lower since May. The smoother six-month rate has been falling since June, though it remains above the official objective. That suggests little urgency to hike beyond what is already planned. Growth is softening too. The Atlanta Fed’s GDPNow model has cut its third-quarter estimate from 5-6% in late July and early August to 3.7%, with another update due Thursday.

That makes gold’s slide the odd signal out. If markets pare their 2027 hike bets toward the Fed’s view, lower yields and a softer dollar would typically help the metals. For now, the price action points the other way.

The University of Michigan’s preliminary October consumer sentiment survey on Friday, expected to show a small decline, is the next data point of note. The Conference Board’s confidence gauge recently fell to its lowest since 2014, and the Michigan index sits near record lows. The bigger test arrives next week with the US consumer price index (CPI) report.

Ilya Spivak, tastylive Head of Global Macro, has over 15 years of experience in trading strategy. He specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak

For live daily programming, market news and commentary, visit tastylive.com or @tastyliveshow on YouTube

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.