Gold Prices Slip as Fed Rate Outlook Shifts; Silver Hits 11-Month Low

GOLD PRICES fell on Thursday as investors weighed the Federal Reserve’s latest decision, stronger-than-expected US growth and rising inflation, with precious metals responding to shifting interest-rate expectations and silver suffering a sharper decline, writes Atsuko Whitehouse at BullionVault.

Spot gold fell 0.4% to $4024 per troy ounce following Wednesday’s Federal Reserve decision and Thursday’s US economic data.

Prices for silver, which derives nearly 60% of its annual demand from industrial uses, dropped 2.6% to $52.39 per troy ounce, its lowest level since late November last year. The gold-to-silver ratio widened to around 77, its highest level in 11 months.

US GDP grew at an annualised rate of 3.4% in the third quarter, beating forecasts of 3.2% and marking the fastest growth in a year. September PCE inflation rose to 3.6% from 3.4%, while core PCE – the Fed’s preferred measure of underlying inflation – edged up to 3.1% from 3.0%, broadly as expected.

At Wednesday’s press conference, Fed Chair Kevin Warsh said that “economic activity is expanding at a strong pace” but “inflation remains elevated.”

Earlier on Thursday, the yellow metal pared gains made following Warsh’s press conference on Wednesday. The Fed held its benchmark rate at 3.75–4.00% in a 10–2 vote. 

“The risk of broader market deleveraging could weigh on gold in the short term, even as longer-term demand for portfolio diversification and protection against fiscal and geopolitical risks remains supportive,” says Ole Hansen, head of commodity strategy at Saxo Bank.

“The inflationary impact of elevated energy prices, developments in the AI sector and the risk of further equity market liquidation, together with movements in bond yields and the dollar, will remain key drivers.”

According to CME’s FedWatch tool, markets modestly pared back expectations for further Fed tightening after Wednesday’s decision and press conference. By around 10:05 pm London time on Wednesday, the probability-weighted policy rate expected for September 2027 had fallen to 4.61% from 4.66% before the announcement, implying slightly fewer than three quarter-point increases from the current level. The probability of a December hike stood at 78.4%.

By 1 pm London time on Thursday, following the US economic data releases, the probability of a December rate hike stood at 83.3%, up from 79.6% at 9 am. The probability-weighted rate expected for September 2027 also edged higher, from 4.55% to 4.58%, still implying just under three additional quarter-point increases from the current level.

The dollar index – a measure of the US currency’s value versus its major peers – rose 0.08% on Thursday, after slipping 0.1% in the previous session.

Ten-year US Treasury yields – a benchmark for government and many financial and commercial borrowing costs – fell to 4.965%, down from 5.022% ahead of the US economic data releases and 5.045% in the previous session.

Warsh stressed that policymakers remained ready to act as circumstances required, with incoming economic data guiding their next decision.

He also said the Fed’s goal “isn’t to throw sand in the gears” of the economy, arguing that stronger growth itself was not driving inflation.

Brent crude futures for January 2027 delivery fell 2.24% to $109.17 per barrel on Thursday as hopes of renewed peace talks eased concerns over Middle Eastern oil supply disruptions. US Vice President JD Vance reportedly sent a letter to Iranian Security Council chief Mohsen Rezaei seeking to revive negotiations. 

Meanwhile, Israel’s election remained inconclusive, with Prime Minister Benjamin Netanyahu’s bloc projected to secure 53 of parliament’s 120 seats, compared with 48 for Gadi Eisenkot’s opposition bloc and 19 for Arab-led parties. Neither main bloc secured the 61 seats needed for a majority, leaving Netanyahu likely to remain caretaker prime minister during coalition negotiations. 

South Korea’s technology-heavy Kospi fell 1.24% on Thursday, with Samsung Electronics shares down 4.1% after chip profits missed forecasts and capital spending increased. The pan-European Stoxx 600 index rose 1.0%, while the S&P 500 opened 0.57% lower and the Nasdaq 100 fell about 2% in early US trading.

In after-hours trading on Wednesday, Microsoft shares rose as strong cloud growth helped generate $18.6 billion in free cash flow, while Alphabet shares fell as heavy AI spending pushed its free cash flow into a deficit of $9.07 billion.

Gold priced in Euros fell 0.4% to €3614 per troy ounce on Thursday, as the European Central Bank (ECB) left its deposit rate unchanged at 2.50%, as expected. The Euro edged lower against the US Dollar following the decision. Earlier in the day, the ECB announced that President Christine Lagarde would step down on 7 February 2027, ahead of the scheduled end of her term in October. 

Gold priced in Pounds also fell 0.6% to £3020 per troy ounce on Thursday. Wednesday’s UK Budget prompted a muted market reaction, with sterling broadly steady following the announcement and 10-year gilt yields easing by around 2 basis points.

On Wednesday, Warsh announced that one of the eight FOMC meetings in 2027 would be dedicated solely to monetary policy strategy, with no rate vote or policy statement planned. Two meetings are expected to follow the same format in 2028.