Market Update

Dear reader, welcome to the latest GoldRepublic newsletter! In just five minutes, we will fully inform you of current precious metal prices and the most relevant news that affects your investment in precious metals. Don't miss out on these valuable insights!

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1. This week it was all about the Fed

The US central bank took center stage this week. After weeks of doubt and uncertainty, there was another interest rate cut. Nevertheless, the picture was anything but unambiguous. The interest rate was cut by 0.25 percentage points to 3.5-3.75%, but the decision received a remarkable number of votes against. Two board members did not want a reduction, one even wanted a bigger step. There were also strong objections outside the official voters.

Powell acknowledged that there was no consensus: inflation remains too high, the labor market is weakening, and, as a central bank, you only have one policy tool. “You can't do two things at the same time,” he said. Not an easy message.

Nevertheless, the tone has been set: the Fed will start buying US government bonds again from December 12, worth 40 billion dollars in the first month. This already ends the period of so-called quantitative tightening (reducing the balance sheet). This is remarkably fast, and shows that the Fed is concerned about liquidity in the financial system.

2. The markets reacted divided

At first, the markets reacted positively: interest rates fell and an additional bond-buying program, but the next day, sentiment reversed. The disappointing reports from Oracle, a major player in the AI market, depressed the tech sector. Despite substantial investments in AI data centers, the benefits are not forthcoming. Investors fear that the AI hype is cooling faster than expected.

3. US labor market: mixed picture

Unemployment remains a central focus for the Fed, and this week the picture was mixed:

• The number of open vacancies rose slightly to 7.67 million, the highest in five months.
• At the same time, the number of layoffs rose to 1.85 million, the highest since early 2023.
• The number of new appointments also declined.

In short: the labor market is cooling down, but worryingly hard. According to economists, the picture is less bleak than some alternative data points previously suggested.

4. Germany clashes with Trump

The renewed tension between the US and Europe took on a face this week: German Chancellor Friedrich Merz stated that the era of “normative cooperation” with the US is over. He called the US security strategy under Trump “unacceptable for Europe” and called for greater US independence.

At the same time, Germany is drawing the military purse. Next week, parliament will vote on defense contracts worth €52 billion, making the Bundeswehr the strongest conventional force in Europe.

5. Is the ECB threatening to increase again soon?

Isabel Schnabel, the German member of the ECB's Executive Board, suggested that a rate hike is not out of the question. This is remarkable, because the euro zone is barely growing and has already had eight interest rate cuts since June 2024.

Most economists find a rate hike illogical. Credit conditions are again tightening slightly, inflation expectations remain below 2%, and economic growth for 2026 is estimated at just 1%. In this context, a rate hike would do harm rather than help.

6. Global interest rates up

It is remarkable that long-term interest rates are rising again worldwide. Treasury yields reached their highest level since 2009, even before the Fed's interest rate decision. Investors seem to assume that the era of rate cuts is coming to an end.

The big question: do governments allow that? After all, higher interest rates mean significantly higher interest charges on increasing debts. What central banks want and what is politically feasible do not have to be the same. The battle between monetary policy and fiscal reality is far from over.