Market expectations are firmly set for the Federal Reserve to cut interest rates by 25 basis points at its upcoming Tuesday-Wednesday meeting, with an 87% probability priced in by traders. This potential shift is a powerful tailwind for gold, as lower interest rates enhance the appeal of non-yielding assets like the precious metal. Already a top performer for 2025 with gains exceeding 60% year-to-date, gold stands to benefit further from a more accommodative monetary policy.
Economic Data Paints a Softer Picture
Recent U.S. economic indicators have surprised to the downside, providing the Fed with compelling reasons to consider easing. The private sector shed 32,000 jobs according to the latest ADP report, marking the most significant contraction in two and a half years. Furthermore, Challenger job cut announcements soared to 71,321 for November alone, bringing the 2025 total to 1.17 million. This apparent softening in the labor market represents a stark reversal from previous months of robust employment data.
The U.S. dollar index has retreated to 98.8, its lowest point since late October, removing a traditional headwind for dollar-denominated gold. The metal itself posted a monthly gain of 6.5%, consolidating at elevated levels. The market now awaits the delayed release of the September PCE inflation figures, the Fed’s preferred price gauge, which could provide the final catalyst for the rate decision.
Diverging Demand Trends Provide Context
The demand landscape for physical gold presents a mixed picture. While institutional buyers remain active, retail interest in key Asian markets has been subdued. In India, prices hovering near record levels are deterring potential buyers, with many awaiting a correction. A similar dynamic is at play in China, where high prices and market volatility are keeping private purchasers on the sidelines.
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Central bank activity, however, offers a strong counterbalance. The World Gold Council reported net purchases of 53 tonnes in October—a 36% increase from the previous month and the highest level of monthly net demand since the start of the year. These substantial institutional acquisitions provide fundamental support beneath the market.
Silver Steals the Spotlight with Record Run
While gold consolidates, silver’s performance has been even more dramatic. The industrial metal surged to a fresh all-time high on Wednesday, boasting year-to-date gains of over 100%. This remarkable rally is fueled by substantial inflows into exchange-traded funds, a structural supply deficit, and its recent designation as a critical mineral on the U.S. official list.
Looking ahead, gold is poised for a relatively unchanged weekly close despite daily volatility. Speculation regarding a potential leadership change at the Fed, with Kevin Hassett possibly succeeding Chair Jerome Powell in May 2026, is stoking expectations for an even more aggressive easing cycle. Until the Fed’s announcement this coming Wednesday, the gold market is likely to remain in a holding pattern, supported by rate cut prospects but tempered by its recent steep ascent.
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