Fed Rate Cut Odds Hit 87%: What It Means for Gold and Silver Prices

TLDR

• Gold traded near $4,256.20 per ounce on Monday, a six-week high, as the US dollar weakened and Fed rate cut expectations strengthened
• Silver surged to a record $57.86 per ounce, extending a six-day rally driven by global supply shortages and speculative buying
• Markets now price in an 87% chance of a 25-basis-point Federal Reserve rate cut in December based on weak economic data
• Supply tightness pushed Shanghai silver inventories to near-decade lows while London warehouses experienced historic squeezes
• President Trump stated he has chosen his Federal Reserve Chair nominee but has not disclosed the name

Gold prices maintained their position near a six-week high on Monday, with spot gold trading at $4,240.55 an ounce after reaching $4,256.20 earlier in the session. The precious metal gained more than 4% last week.

Gold Dec 25 (GC=F)

The US Dollar Index dropped to a two-week low, making gold cheaper for international buyers. This currency weakness combined with safe-haven demand has supported bullion prices.

Markets are now pricing in an 87% probability of a 25-basis-point interest rate cut at the Federal Reserve’s December meeting. This shift follows a series of softer US economic data releases and signs that inflation pressures are declining.

The prolonged government shutdown delayed the release of official economic data, creating uncertainty among investors. Federal Reserve policymakers have offered mixed commentary on the path forward for monetary policy.

Lower interest rates typically benefit precious metals because they reduce the opportunity cost of holding non-yielding assets. The current rate cut expectations have provided strong support for both gold and silver.

Record-Breaking Silver Rally Continues

Silver outpaced gold with a jump to $57.86 per ounce on Monday, setting a new all-time high. The white metal has gained for six straight days and doubled in price this year, compared to a roughly 60% rally in gold.

Supply constraints are the primary driver behind silver’s surge. London warehouses received a record amount of silver in October to ease a historic market squeeze, but this has put pressure on other global trading centers.

Shanghai Futures Exchange inventories recently fell to their lowest levels in almost a decade. The cost of borrowing silver for one month remains elevated, indicating ongoing market stress.

Daniel Hynes from ANZ Group Holdings said shortages from the London squeeze continue to impact global markets. David Wilson of BNP Paribas noted that the recent move has been speculatively driven, with fast money chasing accelerating momentum.

The gold-silver ratio has declined to near 70, meaning it takes about 70 ounces of silver to purchase one ounce of gold. Traders are monitoring whether silver is becoming overvalued relative to gold.

Fed Chair Speculation and Critical Minerals Designation

President Donald Trump announced Sunday that he has selected his nominee for Federal Reserve Chair but did not reveal the name. Speculation has centered on Kevin Hassett, former Fed Governor Kevin Warsh, and current Governor Christopher Waller.

The choice of Fed Chair could influence monetary policy direction and the pace of future rate cuts. This uncertainty has kept traders focused on precious metals as a hedge against policy volatility.

Silver was added to the US Geological Survey’s critical minerals list last month. Traders are watching for potential tariffs on the metal, which could further tighten supply and discourage exports from the United States.

Investor interest in silver exchange-traded funds increased in November after profit-taking in October. Silver mining stocks posted gains on Monday, with Australian companies Sun Silver and Silver Mines jumping 21% and 13% respectively, while Hong Kong-listed China Silver Group rose 14%.

Platinum futures rose 0.7% to $1,700.60 per ounce while copper markets remained steady. Chinese factory data showed continued contraction, marking the eighth consecutive month of decline in manufacturing activity.

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