Gold and silver remain strong today, even though the interest rate environment remains challenging for precious metals. US Treasury yields remain elevated, while markets are pricing in an approximately 25 basis point rate hike by the Fed at today’s meeting. Under normal circumstances, this should increase pressure on assets that do not generate interest. This time, however, the metals are performing significantly better.
One possible reason is the geopolitical situation. Markets are seeing signals of a possible agreement or ceasefire between the US and Iran. Any de escalation could reduce the risk premium in the oil market and ease concerns about further inflationary pressures.
The key question remains how markets will interpret today’s Fed decision. The rate hike itself is largely priced in, meaning the central bank’s communication will likely be more important. A hawkish signal suggesting the possibility of further rate hikes could once again support the dollar and Treasury yields, increasing pressure on gold and silver. A more cautious tone, however, could allow the metals to continue rising.
For silver, its industrial use remains an additional factor. The metal can therefore respond not only to expectations for interest rates and the dollar, but also to the outlook for global economic growth. This means that the current strength in silver may have somewhat different drivers than gold.
Today’s session will therefore be an important test of the metals’ resilience to a hawkish Fed. If the rate hike is accompanied by cautious communication, while further signs of US Iran de escalation and falling oil prices emerge, gold and silver could receive additional support.
Source: XTB Research
Source: XTB Research
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