Gold remains range-bound ahead of Fed, underpinned by soaring silver and soft dollar
OUTSIDE MARKET DEVELOPMENTS: The FOMC reconvened this morning and will announce policy at 2:00 PM ET. Market expectations favor a 25 bps rate cut, with Fed funds futures putting the probability at just under 90%. The forward guidance will be closely scrutinized for indications of whether the Fed's easing campaign will continue in 2026.
The Fed will also release post-government-shutdown SEP revisions. GDP forecasts are expected to be lifted, while inflation and unemployment estimates are likely to be trimmed. That may favor a Q1'26 pause, but we'll have to see how the trade interprets the data.
The Bank of Canada held the policy rate steady at 2.25%, citing that the current level is appropriate given the economic outlook. Recent data revisions indicate Canada's economy was stronger than previously estimated. Governor Macklem acknowledged that tariffs have done damage, but the economy is "proving resilient overall." The Governing Council emphasized a cautious approach to future policy amid elevated uncertainty from tariffs and structural economic shifts.
The SNB is also expected to hold steady when it announces policy on Thursday. Meanwhile, the BoJ is widely expected to tighten next week.
The national average for regular gasoline fell below $3 this week, the lowest price in nearly five years. Record-high U.S. domestic crude output and ramped-up production from OPEC+ are keeping oil under pressure.
My 20-year-old son paid $1.69 a gallon in Denver this week. As a young working man also attending school, he was thrilled to be able to fill his tank for $26.
Lower gas prices act as a direct boost to household disposable income, freeing up an estimated $450 million per day for discretionary uses such as holiday gifts, travel, and dining. Economists estimate that consumers redirect 20-50% of gas savings into non-energy spending within weeks, which contributed to record Black Friday and Cyber Monday sales.
Overall, Cyber Week (Thanksgiving through Cyber Monday) generated $44.2 billion in online sales, a 7.7% rise, with platforms like Shopify reporting $14.6 billion in global merchant sales across the weekend, up 27% from last year. The results underscore resilient consumer spending despite economic headwinds.
MBA Mortgage Applications rose 4.8% in the 5-Dec week, versus -1.4% in the previous week. The 30-year mortgage rate ticked up to 6.33% from 6.32%.
Q3 ECI +0.8% in line with expectations, versus +0.9% in Q2. Wage growth slowed to a +0.8% pace, from +1.0%.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$11.04 (-0.26%)
5-Day Change: +$0.61 (+0.01%)
YTD Range: $2,607.16 - $4,381.21
52-Week Range: $2,585.51 - $4,381.21
Weighted Alpha: +59.12
Gold is straddling $4,200 as the trade awaits today's Fed decision and forward guidance. Worries about a hawkish cut have kept the yellow metal range-bound, although a soft dollar and strong silver are limiting the downside.
If the indication this afternoon is that the Fed is on pause moving forward, gold could retreat deeper into the well-defined range. The lower limit of the triangle pattern comes in at $4,125, right between the 20- and 50-day moving averages. If the market prices out further easing in H1, scope would be for a drop to the $4,000 zone.
If the SEP revisions are not as favorable as the market seems to be anticipating, a boost to rate cut expectations for Q1'26 would provide some lift for gold. A breach of the $4,259.21/$4,264.30 would bode well for a retest of the all-time high at $4,381.21. New record highs would put gold back on track for attainment of upside objectives at $4,515.63 and $5,000.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$0.354 (+0.58%)
5-Day Change: +$2.366 (+4.04%)
YTD Range: $28.565 - $61.600
52-Week Range: $28.565 - $61.600
Weighted Alpha: +120.06
Silver added to Tuesday's impressive 4% gain, establishing a new record high at $61.600. The white metal continues to be spurred by strong industrial demand, and expectations that AI will continue to stoke that demand amid a persistent supply deficit. Resilient global economic growth and a weak dollar are contributing to the bid.
Constrained mine output is failing to keep up with consumption and is being exacerbated by China's new strict export controls for 2026, sparking a pre-restriction buying frenzy. Unlike some restrictions, which were suspended until November 2026 as part of U.S.-China trade concessions, the silver-specific rules were not affected by the suspension and remain on track.
AI and tech sector earnings have been solid this week, tempering concerns about overvaluation. Strong earnings bode well for continued investment in AI infrastructure, such as data centers and associated hardware, which is a major driver of industrial silver demand due to the metal's superior electrical conductivity and thermal properties.
My next significant upside objective is $63.367 (200% retracement of the corrective decline from 54.465 to $45.563). Big-round-number resistances are noted at $62 and $63.
Today's early U.S. low at $60.125 marks initial support. Former highs at $59.331 and $58.974 provide minor intervening barriers ahead of last week's lows at $56.509/$56.232.
Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com
Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.