Gold prices took a slight dip as investors eagerly awaited the U.S. Federal Reserve's decision, with a rate cut expected to be announced later. Silver, however, continued its upward trajectory, reaching new highs. Spot gold prices fell 0.4% to $4,193.60 per ounce at 11:13 GMT, while U.S. gold futures for February delivery dropped 0.3% to $4,221.60 per ounce. Silver, on the other hand, rose 0.7% to $61.11 per ounce, having previously hit an all-time high of $61.61. This surge in silver prices is attributed to rising industrial demand, declining inventories, and its classification as a critical mineral by the United States. Silver's year-to-date increase stands at an impressive 112%.
The market's attention is now on the Federal Open Market Committee's (FOMC) two-day policy meeting, which concludes later today. A 25-basis-point rate cut is expected to be announced at 19:00 GMT, with Jerome Powell set to address the public at 19:30 GMT. Market sentiment suggests an 88% probability of this reduction. Nitesh Shah, a commodities strategist at WisdomTree, notes that gold is currently in a range-bound trading pattern, awaiting FOMC news. He emphasizes that the guidance for future policy, rather than the rate cut itself, is more likely to influence gold prices, which are currently under pressure from higher Treasury yields.
Carsten Menke, an analyst at Julius Baer, highlights the physical tightness in the silver market as a factor attracting short-term speculators and trend followers. He also points out that gold demand from investors, as measured by physically-backed product holdings, has been less robust compared to silver in recent weeks. Carolane de Palmas, an analyst at ActivTrades, agrees that gold's performance significantly influences silver prices, and any correction in gold could lead to heightened volatility in silver.
The appointment of Kevin Hassett, a White House economic advisor, as the potential successor to Jerome Powell as Fed chair, has sparked interest. Hassett suggested there was 'plenty of room' to further lower interest rates, but rising inflation could alter this strategy. Lower interest rates typically favor non-yielding assets like gold. RBC Capital Markets has revised its long-term gold price forecasts, predicting an average of $4,600 per ounce in 2026 and $5,100 per ounce in 2027, citing geopolitical risks, softer monetary policy, and persistent budget deficits.
