Federal Reserve Holds Rates Steady as Gold Surges $200 in a Single Session

Market Overview

The Federal Reserve released its latest policy decision yesterday, opting to keep interest rates unchanged and offering no indication that rate cuts will resume in the near term. In response, volatility across U.S. equities and Treasuries remained contained. Supported by gains in technology stocks, the S&P 500 briefly broke above the 7,000 level in early trading, marking a new all-time high.

U.S. Treasury Secretary Scott Bessent publicly reaffirmed his support for a strong dollar, helping the U.S. Dollar Index rebound by 0.75% and briefly touch an intraday high of 96.787.

At the sector level, the memory chip industry staged a broad-based rally. Seagate Technology surged 19% following earnings, lifting Western Digital by 10% and Micron by more than 6%. Earnings results among mega-cap stocks were mixed. Meta shares jumped over 8% in after-hours trading on strong results, Tesla gained 2%, while Microsoft fell more than 4% after issuing weaker-than-expected guidance. ASML opened higher post-earnings but reversed course, closing down 2.2%.

On the macro and FX front, U.S. Treasury yields remained range-bound following the Fed decision, with the 10-year yield ending largely unchanged. The Japanese yen snapped a three-day rally, retreating sharply by 0.86%. Cryptocurrencies continued to consolidate below the $90,000 level.

Commodities once again delivered extreme price action. Gold and silver staged a historic surge as safe-haven demand and inflation hedging converged. Spot gold soared nearly $200 in a single day, up approximately 4%, approaching $5,400 per ounce. Silver climbed more than 4%, while New York silver futures briefly spiked as much as 10.5% intraday. Crude oil also rebounded, with WTI crude rising back above $63 per barrel, marking a four-month high amid supply-driven expectations.

Key Themes to Watch

Powells Remarks

Federal Reserve Chair Jerome Powell stated that inflation risks have eased to some extent, while labor market risks appear to be stabilizing. He emphasized that further rate hikes are not the baseline assumption for the Feds next policy move. Powell noted that most of the impact from tariffs has already been transmitted to the economy and expects tariff-driven inflation pressures to fade by mid-2026. He declined to comment on the trajectory of the U.S. dollar.

While Powell avoided substantive responses to politically sensitive issues, he remarked that the lawsuit involving Fed Governor Lisa Cook could represent one of the most significant legal cases in the Federal Reserves history. He also suggested that the next Fed Chair should remain distanced from electoral politics.

Strong Demand at Japans 40-Year Government Bond Auction

Japans auction of 40-year government bonds on Wednesday recorded a bid-to-cover ratio of 2.76, the highest level since March last year. Following the auction, yields on the 40-year JGB fell by 2 basis points to 3.915%.

Despite the improved auction results boosting short-term confidence, strategists cautioned that market volatility is likely to persist. Demand appears to have been driven more by elevated yield levels and tactical buying rather than a broad-based improvement in confidence toward ultra-long-dated bonds.

Key Economic Data Ahead (GMT+8)

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• Initial Jobless Claims for the week ending January 24 (thousands)

• U.S. Trade Balance for November (USD billions)

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• U.S. Factory Orders, month-over-month (November)

• U.S. Wholesale Sales, month-over-month (November)