Gold and silver start the week on defense with focus squarely on Wednesday's Fed decision

OUTSIDE MARKET DEVELOPMENTS: Markets are laser-focused on this week’s FOMC meeting, with the trade pricing an 85-88% chance of a 25 bp rate hike on Wednesday. Oil above $100, last week's sticky inflation readings, and a resilient labor market have led to much more hawkish market expectations.

U.S. Treasury yields climbed last week, underpinning the dollar, as hotter inflation data and escalating oil prices fueled expectations of tighter Fed policy, with the 10-year note pushing close to the key 5% level by Friday. This week is beginning with yields hovering just below that psychological threshold amid high odds of a rate hike on Wednesday, keeping bond markets on edge.

Markets are also looking ahead to the BoJ meeting (Sep 17-18), with a 25 bp hike to 1.25% – the highest in 31 years – almost fully priced in. Traders will hang on Governor Ueda’s Friday presser for any hawkish signal on faster tightening, as sticky inflation risks from oil, yen weakness, and AI demand keep the pressure on Japan’s long-awaited normalization path.

Anthropic’s CEO Dario Amodei, backed by OpenAI’s Sam Altman and xAI's Elon Musk, called for deliberately slowing frontier model development due to safety risks. The comments triggered a sharp selloff in chipmakers and AI infrastructure stocks as investors suddenly priced in lower near-term demand for GPUs, data centers, and the entire buildout trade, while rotating into cybersecurity and software names seen as relative winners in a more cautious AI era.

President Trump dismissed these concerns, calling the AI slowdown a “sick conspiracy” that only benefits China, declaring on Truth Social that “the only control or ‘guardrails’ that AI needs is a STRONG AND SMART (High IQ!) PRESIDENT.” He insisted the U.S. is already leading China and that “WHOEVER WINS AI, WINS,” while telling reporters the country cannot afford to slow down.

China has already rejected calls for a global slowdown as “fearmongering” and a “Cold War playbook” aimed at containing its progress and locking in an American lead. If the U.S. slows development, China and other ambitious countries – particularly in Asia (South Korea, Japan, India, Singapore) and some Middle Eastern states – would be incentivized to ramp up investment and infrastructure to capture relative advantage, talent, and market share.

For better or worse, the AI genie is out of the bottle. Competitive pressures from China and other nations ensure the technology will keep advancing rapidly somewhere in the world.

The Iran war, now in its seventh month, remains a grinding standoff with no breakthrough. Over the past few days, Saudi Arabia shut its critical East-West oil pipeline after drone attacks launched from Iraq (widely linked to Iran-backed militias), while Iran-aligned Houthis seized more Red Sea territory and the strategic Bab al-Mandeb approaches. Planned Gulf-Iran talks on reopening the Strait of Hormuz were postponed, keeping oil supply risks elevated as Trump signals openness to a deal after the midterms.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$54.04 (-1.24%)
5-Day Change: -$128.26 (-2.91%)
YTD Range: $3,945.52 - $5,595.02
52-Week Range: $3,626.99 - $5,595.02
Weighted Alpha: +8.22

Gold begins the week on defense, weighed by a firmer dollar and rising rate-hike expectations ahead of the FOMC policy decision on Wednesday. The yellow metal dipped to a five-week low before catching a bit of an intraday bid.

 

While gold traded briefly below the rising 50-day moving average, the 61.8% retracement level of the June/August rally at $4,232.32 was left untested. The declining 100-day moving average still seems to be an attraction, but the yellow metal remains lower on the day.

I'm looking for trading to be generally limited by the 50-day MA on the downside and the 20-day on the upside ahead of Wednesday's Fed decision. If the Fed remains on hold (my leaning), last week's high at $4,442.87 should get challenged quickly. Above that, the 200-day MA at $4,543.25 and the 25-Aug high at $4,696.31 would be attractions.

Despite the recent sell-off, investors continue to exhibit an interest in gold. Global ETFs saw net inflows of 8.7 tonnes last week. It was the tenth-straight week of net inflows. 

If the Fed does indeed tighten, more serious tests below the 50-day MA would be likely, with potential to the $4,200 zone. Deeper retracement would become likely if the Fed indicates that further hikes are in the offing. If the statement, projections, and Warsh comments suggest another hike is off the table into 2027, gold could rebound into the range.

Gold’s underlying fundamentals remain broadly supportive. Persistent geopolitical tensions in the Middle East, sticky inflation pressures from elevated oil prices, and ongoing central-bank demand continue to underpin longer-term investor interest in the metal as a store of value and portfolio hedge.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$1.700 (-2.64%)
5-Day Change: -$3.120 (-4.71%)
YTD Range: $54.778 - $121.630
52-Week Range: $41.142 - $121.630
Weighted Alpha: +25.03

Silver fell to a five-week low in early U.S. trading on Monday. The white metal is being pressured by expectations of a Fed rate hike on Wednesday, which is providing support for the dollar.



Talk of an AI slowdown has pressured copper prices by dimming expectations for the massive data-center and power-infrastructure buildout that drives a meaningful share of the metal’s demand growth. Silver, which is used in electronics, high-density connectors, and thermal materials within AI hardware, faces similar headwinds as investors reassess industrial demand tied to the same capital-spending cycle.

The FOMC meeting is the market's focus this week. Like gold, I expect silver to rebound if the Fed remains on hold. The converging 20-day and 100-day moving averages at $66.447/$66.808 mark an important resistance zone that will tighten ahead of the policy decision. A push above this area would bode well for a retest of last week's high at $68.314, with potential for renewed probes above $70.

If the Fed does indeed tighten policy as the market now seems convinced they will do, more serious tests below the 50-day moving average at $62.571 become likely. A breach of today's low at $62.346 would shift attention to important Fibonacci support at $61.015.

That being said, silver’s underlying fundamentals remain strongly bullish due to a projected sixth consecutive year of structural market deficit totaling around 46 million ounces in 2026, driven by stagnant mine supply, while industrial demand from electronics, solar, EVs, and emerging AI applications (talk of slowdown notwithstanding) continues to outpace available metal. This multi-year shortfall has steadily depleted above-ground inventories, creating a tightening physical market that supports higher prices over the medium to long-term regardless of near-term macroeconomic headwinds.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

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