Global gold markets witnessed a striking paradox following the U.S. Federal Reserve meeting on Wednesday, September 17, 2025. Despite the central bank’s decision to cut interest rates—a factor that usually supports precious metal prices—the result was the opposite, as gold prices declined with the U.S. interest rate cut.

This rapid shift raised wide questions among traders and investors about the reasons behind the drop and its future implications. In this comprehensive Gold.sa article, we explain how this decline affected gold prices in the Saudi market.

What Happened at the Federal Reserve Meeting on September 17, 2025?

The Fed announced on September 17, 2025, a quarter-point (0.25) interest rate cut, setting the target range at 4%–4.25%. This was the first rate cut in 2025 after stability since December 2024. The decision came in response to several factors:

1- Weak U.S. labor market: Recent data showed a slowdown in job growth, and unemployment rose to 4.3%.

2- Rising inflation: CPI reached 2.9% in August compared to 2.7% in July.

3- Pressure from the White House to lower borrowing costs and stimulate the economy.

Fed Chair Jerome Powell stressed in his press conference that this move does not necessarily mean entering a prolonged easing cycle, describing it instead as a “risk management” measure to address labor market weakness. He emphasized that future steps will depend on economic data and inflation.

How Did Global Markets React to the U.S. Interest Rate Cut?

Markets reacted quickly and diversely. Gold initially surged past 3,707 USD per ounce at the announcement, before retreating 0.9% in spot trading to 3,658.25 USD per ounce as the dollar rebounded. U.S. stocks fell due to concerns over the Fed’s negative signals about the labor market.

The U.S. dollar rose 0.5%, making gold less attractive to holders of other currencies. Oil prices also fell despite earlier gains, as traders focused on the impact of the rate cut and U.S. inventory data.

This scene shows that interest rate cuts do not automatically benefit all assets; outcomes depend on expectations and investor reactions.

Impact of the U.S. Interest Rate Cut on Gold Prices

There is usually an inverse relationship between interest rates and gold prices: gold rises when U.S. interest rates fall, as it is seen as a safe-haven against economic crises. But after the Fed meeting, the opposite occurred—global gold prices fell about 1.2%, driven by a stronger dollar and profit-taking after gold briefly hit 3,700 USD per ounce.