Gold prices experienced a slight decline on Wednesday as market participants anticipated a potential rate cut by the U.S. Federal Reserve and sought insights into future monetary policy directions. Spot gold prices fell by 0.4%, settling at $4,193.60 per ounce by 1113 GMT, while U.S. gold futures for February delivery decreased by 0.3% to $4,221.60 per ounce.
Conversely, silver continued its impressive rally, reaching a new high. Spot silver was up 0.7% at $61.11 per ounce after hitting an all-time high of $61.61 earlier in the session. The surge in silver prices has been attributed to heightened industrial demand, falling inventories, and its recent classification as a critical mineral by the U.S. government. Notably, silver prices have shown a remarkable increase of 112% this year.
Carsten Menke, an analyst at Julius Baer, noted the significance of silver breaking above the $60 mark, which has attracted more short-term speculators and trend followers. He highlighted that this momentum reflects a tightening in the physical silver market.
As the Federal Open Market Committee (FOMC) concluded its two-day policy meeting, a rate cut announcement was anticipated at 1900 GMT, followed by remarks from Chair Jerome Powell at 1930 GMT. Market analysts have assigned an 88% probability to a 25-basis-point reduction in rates. Nitesh Shah, a commodities strategist at WisdomTree, indicated that gold prices have been relatively range-bound leading up to the FOMC’s decisions, stressing that it will be the guidance on future policy that may significantly impact gold, rather than the cut itself. He added that rising Treasury yields are currently exerting pressure on gold prices.
Gold’s performance, according to Menke, has not attracted as much investor interest lately compared to silver, which is holding back gold prices. He also mentioned that gold’s movements heavily influence silver prices; a correction in gold could lead to increased volatility in the silver market.
In related news, White House economic adviser Kevin Hassett, who is a leading contender to succeed Powell as Fed chair, remarked that there remains “plenty of room” for further interest rate cuts, albeit cautioning that rising inflation could complicate that equation. Typically, lower interest rates benefit non-yielding assets such as gold.
In a longer-term outlook, RBC Capital Markets has revised its gold price forecasts upward, projecting an average price of $4,600 per ounce in 2026 and $5,100 per ounce in 2027. The firm cited geopolitical uncertainties, a lenient monetary policy environment, and ongoing budget deficits as central factors contributing to these elevated price expectations.
