Stocks and Gold Prices Surging: Don't Blame the Dollar or the Fed
Stocks and Gold Prices Surging: Don't Blame the Dollar or the Fed
By:Ilya Spivak
Whatever is driving stocks and gold prices to record highs, the Fed and the US dollar are not it.
- Wall Street is back on offense with a vengeance, with tech names out in front
- Gold prices set another record despite a rising dollar and well-supported yields
- September FOMC meeting minutes told the markets what they already knew
Wall Street roared higher, brushing aside yesterday’s worries. The bellwether S&P 500 stock index jumped 0.59%, producing the largest one-day rise in a month. The tech-tilted Nasdaq 100 surged 1.17%, marking its biggest gain in eight weeks. Both benchmarks hit new record highs.
Tech names drove the rally. The sector jumped 1.75%, powered by a blistering 11.37% rise from Advanced Micro Devices (AMD). The chipmaker’s shares have rocketed higher since the beginning of the week following news that the company has struck a multi-year deal with OpenAI likely to be worth billions of dollars in sales.
September FOMC meeting minutes endorse more rate cuts in 2025
Minutes from September’s Federal Open Market Committee (FOMC) repeated familiar arguments citing an increase in downside risks to the US labor market as justification for last month’s 25-basis-point (bps) interest rate cut. Most officials judged that risks to inflation had “either diminished or not increased” since the prior meeting in July.
A “majority of participants” emphasized upside risks to the outlook on inflation, warning that price growth may turn out to be sticky even after the effects of this year’s tariff increases fade. “Some participants” also cautioned that monetary policy may not be particularly restrictive, in what seemed like a clear nod to Wall Street exuberance.
Traders shrugged off this hedging however as “most participants judged that it likely would be appropriate to ease policy further over the remainder of this year.” Fed Funds futures imply that markets have priced in a 94.1% probability of a 25bps cut this month and a 79.2% chance of another reduction in December.
Gold prices continued to sail upward, rising 1.41% to log a fourth consecutive day on the upside and yet another record high. Silver followed suit, jumping 2.28% to hit the highest level in 14 years. While it might be tempting to take this as evidence of some new dovish signal in the Fed’s messaging, that is probably the wrong interpretation.
Fed Chair Powell is unlikely to derail stocks and gold prices… for now
That is because the US dollar rose alongside precious metals, tagging a two-week high, and Treasury bond yields ticked up too. In fact, borrowing costs have risen alongside the greenback since last month’s FOMC meeting. This seems to unambiguously show that something other than sovereign or debasement risk is at work.
Indeed, the priced in policy path for the remainder of this year and through the end of 2026 has barely budged since the beginning of October. Next year’s outlook is particularly controversial: Fed officials see a single 25bps rate cut, while financial markets have priced in 62bps. That amounts to at least two cuts, and a 48% probability of a third one.
On balance, this hints that whatever powered stocks and precious metals, it did not come from the FOMC minutes document or Fed rate cut speculation more generally. If anything, traders seemed content to see that the release passed without tripping up the markets.
More of the same might come after Chair Powell speaks at the Community Banking Conference in Washington DC this week. The Fed chief’s welcoming remarks are unlikely to delve into policy details and traders may be happier for it, at least for now. How long such moves can last on autopilot without fresh fodder remains to be seen.
Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak
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