Gold and silver weighed by more hawkish Fed expectations and dollar strength

OUTSIDE MARKET DEVELOPMENTS: Markets are attempting to steady after Tuesday’s sharp reset driven by hotter-than-expected October inflation data. The stronger CPI reading pushed Treasury yields higher, lifted December Fed rate-hike odds to near-certainty, and weighed on risk assets. However, equities are finding support this morning as Nvidia rebounds from its recent selloff and CoreWeave’s upbeat earnings revive the AI trade. Meanwhile, gold and silver are clawing back some of their losses, with the white metal leading the recovery.

Yesterday's warmer-than-expected CPI print pushed expectations for a December rate hike above 90%, although the odds have moderated slightly today (86.6%). FedSpeak this week has struck a distinctly hawkish tone, with Governor Christopher Waller saying a 50 bps hike should be on the table if core prices rose 0.3% or more (which they did) to protect the Fed’s credibility. Dallas Fed President Lorie Logan and Kansas City Fed President Jeff Schmid echoed the urgency, arguing current policy remains too accommodative.

Goldman Sachs now forecasts 25 bps hikes in both December and March. The bank’s economists also pushed back the expected start of rate cuts to December 2027, citing ongoing inflation risks, resilient demand, and a likelihood that those conditions will extend into early 2027.

The more hawkish tilt lit a fire under the dollar, pushing the index to a new 19-month high. A more convincing breach of the 102.94 high from 14-Oct would bode well for an upside extension toward the next retracement level at 103.80. Above the latter, Fibonacci levels at 104.59 and 105.16 would be in play.



The AI trade is rebounding, led by CoreWeave’s strong Q3 results, highlighted by a 168% y/y revenue surge, a raised full-year outlook, and a massive order backlog. The news lifted Nvidia shares – which provides GPUs to CoreWeave data centers – and sparked gains across chips and neocloud names.

While the bounce is encouraging amid evidence of persistent robust AI infrastructure demand and easing debt fears, its durability remains uncertain amid higher rate expectations, residual Nvidia governance risks, and the sector’s still-elevated valuations. Additionally, last week's midterm results and Democrats flipping several key governorships have heightened the risk that AI development and deployment could face tighter regulation.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$11.64 (+0.29%)
5-Day Change: -$22.02 (-0.54%)
YTD Range: $3,870.47 - $5,595.02
52-Week Range: $3,870.47 - $5,595.02
Weighted Alpha: -6.60

Gold is probing back below $4,000, weighed by more hawkish Fed expectations that have lifted yields and the dollar. Oil is modestly higher, adding to persistent inflation worries as market focus shifts to Friday's PPI report.



The slide back below the 20-day moving average after gains stalled well shy of the $4200 resistance zone takes the wind out of the bull's sails. The next support level to watch is the 4-Nov at $3,920.22, although that may be out of reach ahead of PPI. That being said, I'm not expecting gold to get any help from producer prices.

Today's Asian high $4,066.56 corresponds fairly closely with the 20-day, providing a solid intervening barrier ahead of the highs from early this week at $4,146.32/$4,148.18. The falling 50-day MA should reinforce those highs by next week.

I still think gold needs to clear chart resistance at $4,217.02/$4,225.02 to bolster a bottoming scenario, but that level is now well protected. The washout of speculative long futures positioning noted by Johan Palmberg of the World Gold Council – and mentioned in Monday's newsletter – as the necessary third harbinger of a bottom may be forthcoming.

Despite still-elevated prices, gold recycling dropped 8% y/y in Q3 to its lowest quarterly level since late 2023. According to the WGC, holders in key markets appear to be hanging onto metal in anticipation of further upside (or pledging it as collateral) rather than selling into strength. This provides a quiet supply constraint that offsets record mine output and is getting far less attention than the usual price-or-central-bank narratives.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$1.170 (+2.27%)
5-Day Change: +$0.553 (+1.06%)
YTD Range: $48.624 - $121.630
52-Week Range: $48.624 - $121.630
Weighted Alpha: -12.19

Silver is clinging to intraday gains as revived AI optimism is offsetting the factors that drove gold to new lows for the week. The white metal remains confined to yesterday's range thus far, but the downside remains vulnerable, particularly with the dollar index at levels last seen in April 2025.

 

If yesterday's low at $51.135 gives way, a return to the $50 zone would be likely. Secondary support at $48.977 stands in front of the low for the year at $48.624. New lows for the move would favor a downside extension to the $48 zone initially, although a push to the $45.563 low from last October would have to be considered.

Unlike gold’s subdued recycling, forecasts now point to silver recycling topping 200 Moz in 2026, the highest level since 2012. At the same time, aggressive thrifting in solar panels is cutting that sector’s demand by nearly 20% this year. Thrifting is happening in the AI sector as well, but at a slower pace. This could mean the six-year structural deficit that has provided a solid tailwind could end as soon as next year.

The declining 20-day moving average at $53.651 remains the key upside hurdle that must be cleared to bolster a bottoming scenario. Tuesday's high at $53.711 bolsters this important area. Today's early U.S. high at $52.902 and the  Asian high at $53.182 provide intervening barriers. 


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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