The U.S. Federal Reserve’s decision to cut interest rates by 25 basis points in September 2025, bringing the federal-funds rate to a range of 4.00%–4.25%, marks a pivotal shift in global monetary policy. With two more cuts signalled for the remainder of the year, the move reflects growing concerns over a weakening labour market and rising job risks. This dovish turn is poised to reshape the landscape for commodities, currencies, and central bank strategies worldwide.
Impact on the U.S. Dollar and Global Currencies
Interest rate cuts typically weaken the U.S. dollar, as lower yields reduce its attractiveness to foreign investors. Following the Fed’s announcement, the Dollar Index has shown signs of softening, with major currencies like the euro, yen, and pound gaining ground. This dollar depreciation is expected to continue if further easing materializes, especially if inflation remains elevated and real interest rates turn negative.
The emerging market currencies may benefit from the weaker dollar, attracting capital flows and easing external debt burdens. However, volatility could persist if inflation expectations shift or geopolitical tensions escalate.
The Fed’s dovish pivot has created a fragmented commodity landscape. Investors are recalibrating portfolios to capitalize on dollar weakness, inflation hedges, and structural demand trends.
Precious Metals: Gold and Silver at Record Highs
Gold and silver have surged to record highs, with gold breaching $3,700/oz and silver crossing $42/oz last week. The rally is driven by expectations of lower real interest rates, geopolitical uncertainty, and central bank buying the precious metals. As non-yielding assets, precious metals thrive in low-rate environments where the opportunity cost of holding them diminishes.
As the Fed signals further rate cuts or if inflation remains sticky, gold and silver may continue their upward momentum. Silver’s industrial demand, especially from EVs and solar panels, adds another layer of bullish momentum.
Base Metals: Divergent Trends Amid Dollar Weakness
Base metals have responded variably to the Fed’s easing stance. Copper has emerged as a standout, surging to $10,190/ton on the London Metal Exchange, supported by dollar weakness and robust demand from China’s infrastructure and EV sectors. However, volatility persists due to trade policy risks and tariff exclusions. Likewise aluminium prices too rose to six months high in both LME and domestic markets.
Zinc and nickel face supply-side challenges. Zinc prices have climbed amid declining inventories but rising mine output and weak Chinese construction data pose downside risks. Nickel, despite EV-driven demand spikes, struggles with oversupply from Indonesia and speculative positioning.
Energy Prices: Crude Oil and Natural Gas in Flux
Crude oil prices have remained steady, with Brent hovering around $68 and WTI near $63.5 per barrel. The Fed’s rate cut is expected to support oil demand by stimulating economic activity. However, oversupply concerns, rising inventories, and geopolitical tensions—particularly in Russia and the Middle East—continue to weigh on sentiment.
Natural gas prices have shown signs of stabilization near $3.03/MMBtu, with technical indicators suggesting a potential rebound. Yet, weak seasonal demand and ample storage levels may limit upside potential.
Looking ahead, the latest rate cut by the U.S. Federal Reserve is more than a domestic monetary adjustment—it’s a global signal. As central banks, investors, and commodity markets respond, the ripple effects will shape asset prices, currency dynamics, and economic trajectories in the months ahead. With gold and silver at record highs, base metals diverging, and energy markets in flux, strategic positioning and vigilance will be key to navigating this evolving landscape.
First published in The Economic Times
