When the Federal Reserve cuts rates, but the markets rebel: the divergence that confounds investors

On December 11, 2025, the Federal Reserve announced its third rate cut of the year, reducing the target range by 25 basis points to 3.5%-3.75%. An expected decision, almost taken for granted by the markets. Yet, what happened afterward was anything but conventional.

In just a few days, silver prices surged past $64, hitting a new all-time high, US Treasury yields rose to 4.17% instead of collapsing as economic theory would suggest, Bitcoin fell from $94,500 to $92,000 while gold fluctuated aimlessly. Three markets, three completely different reactions to the same monetary policy stimulus.

What emerges is a uncomfortable truth for traditional investors: monetary policy alone no longer controls asset prices as it once did. And silver forecasts are the most striking proof.

The Fed’s decision and the signal of weakness

The Federal Reserve justified the rate cut by highlighting signs of weakness in the US labor market. Economic activity is expanding moderately, but job creation is slowing, and inflation remains relatively high.

What was not overlooked was the number of dissenting votes: three, the highest since September 2019. One member proposed a 50 basis point cut, while two supported keeping rates unchanged. A fracture within the central bank indicating deep divergences on the path forward.

The Fed’s dot plot forecasts only one more cut in 2026, but this forecast already appears fragile. With a change in presidency on the horizon and increasing political pressures, the future trajectory of US monetary policy remains uncertain. And the market knows it.

Bitcoin crashes, silver soars: two diverging stories

While traditional assets showed mixed reactions, the cryptocurrency market surprised on the downside. After the Fed announcement, Bitcoin briefly rose to $94,500 before plunging to around $92,000( with the latest data placing it around $90,800). In 24 hours, crypto contract liquidations exceeded $300 million, involving over 114,600 traders.

Market analysts speak of a structural decoupling: despite major investors like MicroStrategy continuing to accumulate Bitcoin, selling pressure remains strong. Standard Chartered recently revised its forecasts sharply downward, cutting the end-of-2025 target from $200,000 to about $100,000. The message is clear: big players’ buying may have plateaued.

The silver situation, on the other hand, is radically different. Since the start of the year, the precious metal has risen an incredible 112%, almost double gold. Silver forecasts for 2026 look even more positive: the market records a supply deficit for the fifth consecutive year, and according to the Silver Institute, the global deficit should be between 100 and 118 million ounces in 2025.

The anomaly of Treasuries changing the game

Perhaps the most worrying phenomenon is what is happening in the US Treasury market. For the first time in nearly thirty years, the Fed’s rate cut did not lead to a decline in yields. On the contrary, the 10-year Treasury yield rose to 4.17%, while the 30-year reached 4.82%.

This anomaly has three interpretations:

Optimists see confidence that the economy will avoid recession. Neutrals consider it a simple return to pre-2008 normality. Pessimists fear a “punishment” from bond vigilantes for American fiscal disorder.

The reality is probably a combination: the market had already priced in easing expectations, while the Fed continues to cut rates with inflation still high, effectively maintaining economic expansion. A contradictory signal that the market is interpreting as potentially inflationary in the long term.

Why silver is flying towards gold (literally)

The surge in silver prices is no coincidence. Several factors are perfectly aligned. Expectations of rate cuts have reduced the opportunity cost of holding non-yielding assets. Silver has been added to the US critical raw materials list, raising fears of possible trade restrictions.

But the real driver is structural demand. Industrial demand, particularly from the photovoltaic sector, will account for 55% of global silver demand. The International Energy Agency predicts that by 2030, the solar sector alone will increase silver demand by nearly 150 million ounces annually.

With such robust demand forecasts and a persistent supply deficit, the market is simply ahead of the curve.

Gold on the edge, central banks accumulating

Gold, by contrast, reacted moderately to the Fed’s rate cut. After the announcement, COMEX futures rose 0.52% to $4,258.30 per ounce.

Holdings in gold ETFs, like the giant SPDR, show a subtle picture: they are slightly down from October’s peak but still up 20.5% year-over-year. The real support comes from central banks: in Q3 2025, global gold purchases by central banks reached 220 tons, up 28% from the previous quarter. The Chinese central bank increased its gold reserves for the thirteenth consecutive month.

Short-term fluctuations in gold prices reflect two opposing forces: support from the Fed rate cut on one side, and pressure from potential easing of geopolitical tensions on the other.

The truth markets are shouting

In the 24 hours following the Fed announcement, COMEX silver surged 109% year-over-year, while 10-year Treasuries hit their quarterly high. Three different reactions to the same stimulus reveal a reality investors must digest: rate cuts are no longer the dominant event moving all assets in the same direction.

Monetary policy remains important, but it is no longer the sole factor. Structural forces underlying individual asset classes—silver deficits, US fiscal deficits, crypto selling pressure—are gaining increasing importance.

With the Fed presidency succession approaching and uncertainty about the new leadership’s direction, 2026 could bring further “non-conventional” surprises. Investors who can identify the true fundamental drivers of each asset class, beyond monetary policy announcements, will find the new balance in this phase of divergence.