Post by : Saif Rahman

Gold prices showed little movement on Wednesday as market participants await a potential interest rate reduction from the U.S. Federal Reserve alongside remarks from Chair Jerome Powell regarding future monetary policy. Meanwhile, silver continued its impressive ascent, exceeding $60 per ounce for the first time ever.

Spot gold dipped slightly by 0.2% to $4,199.92 per ounce, with U.S. gold futures for February delivery experiencing a similar decline of 0.2% to $4,228.10 per ounce. In contrast, silver surged by 1.2% to reach $61.37 per ounce after briefly touching a record of $61.61 earlier in the day.

Market analysts attribute silver’s rapid climb to robust industrial demand, constrained physical supply, and its recent classification as a critical mineral by the United States. "Silver surpassed the $60 mark, attracting short-term speculators and trend-followers into the market," explained Carsten Menke, an analyst at Julius Baer, pointing to the growing physical scarcity in the silver market.

This year, silver has surged an astonishing 113%, showcasing significant investor interest, while gold has remained relatively steady. Menke remarked that gold demand, as observed through physically-backed fund holdings, has lagged behind silver, which partly accounts for gold's subdued price growth.

On Tuesday, holdings in the largest gold-backed ETF, the SPDR Gold Trust, decreased by 0.1%. Conversely, the iShares Silver Trust experienced a 0.53% rise, indicating persistent interest in silver among investors.

The Federal Open Market Committee (FOMC) is currently engaged in a two-day meeting, with a rate-cut decision anticipated at 1900 GMT, followed by remarks from Powell at 1930 GMT. Markets indicate an 88% probability of a 25-basis-point interest rate reduction. Lower rates typically enhance the appeal of non-yielding assets like gold for investors.

Kevin Hassett, a White House economic advisor and a potential successor to Powell as Fed chair, noted that there is "ample room" for further rate cuts, albeit he warned that increasing inflation may complicate such plans.

RBC Capital Markets has upgraded its long-term projections for gold prices, predicting an average of $4,600 per ounce by 2026 and $5,100 per ounce by 2027. Analysts pointed to geopolitical uncertainties, relaxed U.S. monetary policy, and ongoing budget deficits as key drivers of higher gold prices.

As the Fed’s decision draws near, market eyes remain fixed on both the interest rate move and Powell’s insights, which could heavily influence the valuations of gold, silver, and other precious metals.

Gold remains firm for the time being, while silver keeps soaring, driven by both market anticipations and a rising interest in safe and industrial metals.

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