Watching precious metals lately, it can feel as though every headline comes with a sell button attached.
Wednesday’s Fed decision brought no rate increase. Early Thursday, Reuters reported that the probability of a December hike had eased from approximately 84% to 78%, citing CME FedWatch. Gold and silver were nevertheless trading lower.
We understand the frustration. But how much monetary relief did that change actually represent?
Consider a simplified choice between two December outcomes: unchanged rates or a 25-basis-point increase.
At an 84% probability, the expected increase is 21 basis points. At 78%, it is 19.5.
The six-percentage-point decline in hike odds therefore removes just 1.5 basis points from the probability-weighted post-meeting rate.
That is our illustrative calculation under those two assumptions. CME’s methodology derives probabilities from futures prices; those probabilities describe market pricing rather than a commitment from policymakers.
Most of the expected December tightening remained in place. The improvement also proved fragile: a later Reuters update put the probability back around 80%.
For us, this changes how we interpret the apparent contradiction. Precious metals received a modest reduction in one policy risk while still facing broadly similar expected December rates.
A broader improvement would involve expectations across subsequent meetings too. Changes across Treasury maturities help assess how far that repricing extends, although bond yields also respond to other influences.
A disappointing price response can reveal weakness, but its meaning depends on how much favourable news the market actually received.
This episode alone cannot establish that traders are determined to sell regardless of the news. The arithmetic shows how little of the expected tightening was removed.
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