After a long period of speculation about when and how much, the Federal Reserve made the decisive move to cut interest rates. Chairman Jerome Powell told Congress on multiple occasions that there would not be a move until confidence in the economy reached a certain point. As the arrow marks your location on shopping mall or amusement park maps, we are here.

It is the first interest rate cut since the emergency alterations during the early days of the COVID-19 pandemic, now over four years ago. Prior to that, the last intentional rate cut came in 2008. Many remember the economic malaise that prevailed during that time.

The amount of the cut had become the subject of recent discussion, when a cut of some sort looked imminent. There were those who believed it would be one-quarter point. There were others in the camp for one-half point. The one-half point camp won that discussion.

All indications are that the plan includes another cut later in the year, with more cuts possible in 2025 and beyond. Of course, with no one’s ability to predict the future, it will be interesting to see how plans take shape moving forward. As much as two points could be whittled away from the rate before it is all said and done.

“Our patient approach over the past year has paid dividends. Inflation is much closer to our objective, and we have gained greater confidence that inflation is moving sustainably to 2%,” said Powell.

While the stock market reacted immediately to Powell’s news, other impacted entities such as gold may take a little longer to react. Within minutes of the announcement, an email appeared in my inbox with the thoughts of Matthew Jones, precious metals analyst at Solomon Global.

Jones noted that gold, as a non-yielding asset, can benefit during periods of monetary easing. He said investors seeking returns from yield-generating assets, like bonds or savings accounts, will find gold more attractive in lower-rate environments. “Fed rate cuts often result in the depreciation of the U.S. dollar,” he noted. “Since gold is priced in USD, a weakening in the currency makes gold more affordable for foreign buyers, boosting demand and raising prices.

“Historically, rate cuts have correlated with rising gold prices.”

Within the first hour of the news, gold rose to within striking distance of $2,600 per ounce on the spot market. Some precious metals seemed to be along for the ride, as silver headed back above $30 per ounce as well. There’s still a lot more time to watch and see what happens and the effects various moving parts will have, especially as other factors like the November presidential election loom large.

Buckle up.

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