Gold prices are sending a message, but Federal Reserve Chair Jerome Powell isn’t listening. The central bank chief says the precious metal’s surge isn’t about inflation risks, but investors shouldn’t be too quick to dismiss the link.
The
Fed’s decision to hold interest rates steady Wednesday wasn’t much of a surprise, so Powell’s comments were the focus of attention. A more upbeat tone on the economy, minimizing both labor and inflation risks, means traders expect the central bank to freeze its benchmark rate at the current 3.5% to 3.75% level for several months. The S&P 500 slipped below 7000, but the overall stock market mood is still buoyant.
However, for all the cheer, Powell couldn’t entirely mask market concerns. Asked about gold’s recent jump, he dismissed it—“the argument…that we’re losing credibility or something, it’s simply not the case”—pointing to longer-term inflation expectations being consistent with the central bank’s 2% target.
So is the gold price really disconnected from inflation fears? To be fair to Powell, there are various factors driving the yellow metal’s gains. Speculative trading, retail and central bank demand, and geopolitical
risks—with President Donald Trump warning of a “massive armada” heading toward Iran—are contributing to its move above $5,500 an ounce on Thursday.
But it stretches credibility to think gold’s gains have nothing
to do with expectations of rate cuts under the next Fed chair after Powell’s term ends in May and the potential resulting inflationary pressures. After all, a potential candidate to lead the central bank, Governor Christopher Waller, was one of two dissenting votes on the Federal Open Market Committee calling for a rate cut Wednesday. Inflation expectations might shift quickly if the market feels a new Fed chair is vulnerable to political pressure from the White House to reduce borrowing costs.
Powell is walking a tricky line in his final months as Fed chair of defending the central bank’s independence while also looking to maintain market calm. He might choose to turn a blind eye to gold’s signal but that doesn’t mean investors should.
—Adam Clark
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The Fed Can Wait. Powell Is Confident on Economy.
Jerome Powell’s term as Federal Reserve chair is winding down with him seeing the
economy on a firm footing, suggesting a lengthy pause in interest-rate cuts after holding rates steady on Wednesday. Monetary policy is close to neutral, he said, risks look more balanced, and there’s little urgency to cut.
- Fed governors Christopher Waller and Stephen Miran dissented to holding rates steady in favor of another quarter-point cut. The Fed cut three-quarters of a percentage point in the second half of 2025. Yesterday, the policymakers noted growth was solid, an upgrade from their assessment in December.
- Wednesday’s policy statement also said job gains remain low but the unemployment rate has shown signs of stabilization. The Fed dropped language that had pointed to rising downside risks in the labor market, though they noted inflation remains somewhat elevated. Policy is well positioned to respond as data evolve, Powell said.
- Morgan Stanley and Macquarie analysts read Powell’s remarks during the press conference as reinforcing a longer pause, even though many Fed watchers expect modest easing later this year, after Powell’s term as chair ends in May. Powell’s tone on the economy was more upbeat than it has been in months.
- If Powell sounded upbeat about the economy, he was careful in discussing politics. He declined to comment on Justice Department subpoenas, any criticism from the White House, the value of the dollar, or his plans for when his term as chair ends. He did emphasize the importance of Fed independence.
What’s Next: One issue drew a longer response. Asked why he attended Supreme Court oral arguments in the case involving the Trump administration’s efforts to remove Fed governor Lisa Cook, Powell said it would have been harder to explain staying away than showing up.
—Nicole Goodkind and Janet H. Cho
Meta’s AI Spending Is Set to Spike 41% This Year
Meta Platforms is dramatically raising its artificial intelligence spending goals for the year. Fourth-quarter expenses rose 40% about half tied to a hiring spree. For the full-year 2026, Meta sees expenses rising by 41% at the midpoint, with capital expenditures hitting between
$115 billion and $135 billion.
- The capex is being used to build AI data centers, all for Meta’s use. As he has for a year now, Meta CEO Mark Zuckerberg began his prepared remarks on the earnings call by running down where he sees the return on investment from the spending surge.
- He wants to build new AI-based experiences for the 3.6 billion people who use Meta apps, including Facebook and Instagram. In an AI age, Zuckerberg believes these experiences are table stakes if Meta wants to keep users coming back every day. Meta is also using AI to improve ad targeting.
- Meta CFO Susan Li told analysts it has used AI to improve systems that recommend content to users that keeps them engaged on the platforms and the system that targets users with personalized ads. Paid messaging on WhatsApp passed a $2 billion annual run rate in the fourth quarter.
- Microsoft also has been spending enormous amounts of money on its AI infrastructure. Capital expenditures for the second quarter were $37.5 billion, above Wall Street’s consensus estimate. CEO Satya Nadella said they are only at the beginning phases of the “AI diffusion.”
What’s Next: Meta has yet to release the successor to Llama 4, the large language model it released last year. But some believe a new model is coming, The Wall Street Journal reported, which cited an internal Q&A that puts the timeline in the first half of 2026.
—Adam Levine and Angela Palumbo
At Tesla, the Future Is All About Artificial Intelligence
