(Bloomberg) — Gold and silver fell as bond yields pushed higher, with traders looking beyond the Fed’s near-certain rate reduction for cues on monetary policy next year.
Treasury yields climbed, with investors facing a series of auctions beginning Monday and a Fed rate decision Wednesday that may alter 2026 policy expectations. Higher rates are typically negative for precious metals like gold and silver that pay no interest.
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Kevin Hassett, a leading candidate to take over the role of Fed chair, said it would be irresponsible to lay out a plan for rates over the next six months. The White House National Economic Council director emphasized the importance of following economic data on CNBC Monday.
Swap traders continued assigning a near-certain chance of a quarter-point rate cut when the Fed concludes its policy meeting Wednesday. They also leaned toward two more moves by the end of 2026, down from three signaled barely a week ago.
Bets on further easy money by the US central bank have helped silver rally in recent weeks. The metal has more than doubled this year, outshining gold’s 60% surge.
The silver market is also dealing with the aftershocks of a historic short squeeze. One-month lease rates — which represent the annualized cost of borrowing metal in London – remain elevated at around 6%, even after a record amount of metal flowed into the world’s biggest silver-trading hub. These flows in turn have put other centers under pressure: Shanghai’s inventories are near the lowest in a decade.
What Bloomberg Strategists Say…
“Silver heads into the week with the potential for greater volatility as the market navigates the Fed’s policy decision and continued tightness in physical supply. A rate cut this week would preserve the conditions that have supported the metal’s outperformance, but stretched positioning leaves prices exposed to sharper swings.”
— Nour Al Ali, Markets Live strategist. For full analysis, click here.
Options on Comex silver futures have also experienced a buying spree as investors position themselves against wider swings and especially further rallies. Retail traders are pouring into the market, with the five-day average volume on micro futures contracts at a level only exceeded in mid-October, CME Group Inc. data showed.