Markets less focused on gold

The financial market event of the week was undoubtedly Wednesday’s Fed meeting and its eagerly awaited outcome. The markets had already factored in a further 0.25 percentage point cut in key interest rates by the Fed. The more exciting question was that of Fed monetary policy for the coming months.

Fed, inflation, labor market

Fed members expressed their expectations for the US key interest rate to be cut by 0.25 percentage points in both 2026 and 2027, bringing it to between 3.0 and 3.25 percent. They also lowered their inflation forecast for the core PCE rate for 2025 and 2026 by 0.1 percentage points to 3.0 and 2.5 percent, respectively. For 2027 and 2028, it remains unchanged at a respective 2.1 and 2.0 percent. In addition, the Fed announced its continued purchase of T-bills (shorter-maturity US Treasury bonds) worth around US$40 billion per month until further notice. Such news tends to dampen yields on these government bonds, which in turn is likely to boost gold in the medium term. Fed Chairman Jerome Powell also emphasized that the labor market is currently exposed to significant downside risks.

Silver on track for record highs

This news was interpreted by the markets as an indication that, in case of doubt, the Fed would rather cut key interest rates once too often than once too little. Both short-term US Treasury bond yields and the US dollar declined, a development which typically supports commodity prices. Commodity markets, however, currently are focusing more on silver and industrial metals – as underscored by the almost daily record highs for silver (up 120 percent since the beginning of the year) and copper. Gold is trailing somewhat behind but managed to rise to a seven-week high this morning, just shy of its record high.

Gold up slightly week-on-week

While gold prices stood at 4,185 US$ per ounce last Thursday morning, they briefly jumped to 4,259 on Friday. By this week Tuesday, they had dropped to 4,170 and traded around 4,200 in the runup to the Fed meeting. In its wake, gold rose to its current level of 4,285 US$ per ounce.

Xetra-Gold was also up slightly, although somewhat slowed by the firmer euro, which also reached a seven-week high against the US dollar. Xetra-Gold rose from 115.60 € per gram last Thursday morning to 117.50 last Friday afternoon. After a setback to 115.50, it closed trading yesterday at 116.50 and was expected to kick off trading this morning slightly stronger at around 117.40 € per gram.

Markets keep their focus on US data  

Next week is the last full week before Christmas, with several central bank meetings scheduled. The markets will mainly focus on US labor market and consumer price development data.

I wish all readers a relaxing third Advent weekend.