Federal Reserve Chairman Jerome Powell has been trying to be transparent by holding press conferences after each policy-making meeting of the central bank to explain the thinking of the Fed governors who set interest rate policy. But after cutting interest rates for the first time since the Great Recession, when Powell spoke with the media about the highly uncertain economic outlook he faces, the chairman sowed confusion and uncertainty, both of which the financial markets despise. Investors who had been anticipating a gradual lowering of interest rates were suddenly unsure as to whether the central bank’s rate reduction on July 31 might be the first in a series of cuts, or a “mid-cycle adjustment,” as Powell speculated it might be, which could be followed by an interest rate hike. As the press conference continued, the Dow Jones Industrial Average plunged 350 points in a matter of minutes.

Rather than delivering transparency that would reassure investors, the Fed chairman’s openness threw a cloud of uncertainty over the investment outlook. When President Trump announced plans to impose new tariffs on China, an already wobbly stock market was ready to tumble. By week’s end the Dow had lost more than 700 points, a drop of 2.6 percent, as investors fled to the safety of gold, which climbed 2.4 percent.

The central bank governors had already come under criticism from veteran Fed watchers when they boosted interest rates in mid-December. Then, in March, the Fed reversed course, stating there would be no more interest rate increases for the year. It is highly unusual for the Fed to make such a forecast about future policy plans. Now the Fed has cut interest rates, leaving the future up in the air.

The flip-flopping Fed has even come under attack from The Wall Street Journal, which declared in an editorial titled, “The Confusing Federal Reserve,” the Fed is “making up policy on the fly” and argued the central bank “bounces from tightening to easing based on inconsistent logic.” 

A Federal Reserve in apparent chaos may be a serious risk to investors holding stocks priced near perfection in an economy showing signs of a slowdown. During times like these, gold’s status as a safe haven is as important as ever.