Fed Cut Boosts Gold, Silver Hits Fresh Highs

Fed Cut Boosts Gold, Silver Hits Fresh Highs

The US Federal Reserve cut interest rates by 25 basis points in a divided vote, easing monetary policy and lifting hopes for lower borrowing costs ahead. Markets responded by trimming the dollar and lifting precious metals. Gold held gains near recent highs at ₹13,035 per gram for 24K & ₹11,950 for 22K in Delhi , as yields and the dollar moved in opposite directions. Silver jumped sharply in India to touch a new peak of ₹201 per gram or ₹201,000 per kilogram. How will the mix of Fed policy, yields and currency moves shape bullion prices next?

Why The Fed Cut Matters For Gold And Silver

Lower policy rates reduce the opportunity cost of holding metals that do not pay interest. This tends to support demand for gold and silver when markets expect rate cuts. The Fed’s 25 basis point reduction came with clear signs of disagreement among policymakers, which left markets focused on next steps for US policy and on how quickly yields may fall. Both the level of yields and the path of the dollar are now key for metal prices.

Gold reacted by staying near elevated levels in global trading. Spot gold traded near the US$4,199 per ounce area in early December, reflecting firm demand after the policy shift and seasonal buying in some markets. When yields fall and the dollar weakens together, gold generally gains ground. But if yields rise despite the Fed cut, that can cap gains because higher yields raise the cost of holding non-yielding assets.

Why Is Silver Rallying Harder?

Silver often moves more sharply than gold because it combines investor demand with real industrial demand. This time, the metal got extra support from global buying and a weaker rupee in India, which pushed the local rupee price higher. On Dec 10, domestic markets saw silver jump by around ₹12,000 in a single session to near ₹199,100 per kilogram in New Delhi, driven by strong spot buying and global cues. This made silver the more volatile and faster-moving metal in the recent move.

Industrial demand helps explain silver’s strength. The metal is used in electronics, solar panels and medical devices. When global growth expectations and clean-energy demand look steady, silver’s industrial side adds fuel to any investor-driven buying. Combined with a weaker local currency, the net effect in rupee terms can be very large.

What To Watch Next For Price Direction?

First, watch US real yields. If real yields fall further after the Fed cut, metals are likely to receive more sustained support. But if yields rise because markets doubt the durability of rate cuts, gains in gold and silver could be limited. This makes market data on 10-year Treasury yields an important near-term driver.

Second, track the rupee. The currency hit record lows earlier in the week, trading in the 90.42 area before pulling back on central bank activity. A weaker rupee magnifies imported bullion costs and can lift domestic prices sharply. If the rupee recovers, that effect may ease. Currency movements therefore remain important for the rupee-priced bullion market. Third, monitor physical demand and ETF flows. Retail and jewellery buying in India influence local prices, while globally, exchange-traded funds and investor flows indicate whether the rally is investment-led or driven by industrial demand. Strong inflows into silver ETFs, combined with tight physical supplies, can push prices higher. Movement in MCX contracts will also signal local momentum.

Finally, watch macro data. Inflation readings and the upcoming US personal consumption expenditures numbers can influence the Fed’s next moves and, in turn, the metals complex. If inflation comes in lower than expected, the likelihood of further rate cuts increases, and metals usually gain. But if inflation remains sticky, uncertainty around interest rates can lead to higher volatility in both gold and silver.

The Fed’s divided decision has opened a new chapter for precious metals. Will falling yields and a weak dollar sustain the rally, or will currency move and yield surprises reverse the gains in the weeks ahead?

References

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Economic Times
Fortune
The Economic Times
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