Gold extended its losing streak to three sessions on Tuesday, giving up $17.80, or 0.43%, to close at $4,130. The metal is now down roughly 5% over the past month and remains far below the record set in January, when prices topped $5,600. Pressure came from the energy complex, where Brent crude traded above $110 a barrel, its highest level since May. Higher oil prices have stoked inflation concerns and strengthened the case for tighter monetary policy, a backdrop that tends to weigh on a non-yielding asset like gold.
Meanwhile, the odds of a pause at next week’s FOMC meeting have changed very little, and traders still widely expect a hold. According to the CME FedWatch tool, the probability of no change at the October 27-28 meeting now stands at 84%, up about two percentage points from Monday. The bigger shift has come over the past month. A month ago, a slim majority of traders (57.6% versus 42.4%) were positioned for another hike at this meeting. Today, the vast majority expect the Fed to pause.
A pause would follow the Fed’s 0.25% increase in September, which lifted the federal funds target range to 3.75% to 4.00% and marked the first rate hike since 2023. Fed Chair Kevin Warsh has declined to signal his intentions ahead of the October meeting, leaving markets to react to incoming data. Even with a hold widely expected next week, markets continue to price in another increase at the December meeting, which keeps the policy outlook tilted toward tightening.
Silver moved in the opposite direction on the same news. Silver futures posted their second consecutive gain, rising $0.91, or 1.59%, to close at $58.14. Despite the advance, the metal still trades at less than half of its record high above $121 set in January, a reminder of how far it has retreated from its peak.
The divergence between the two metals has pulled the gold-silver ratio nearly 2% lower, to just above 71 at 71.11 ounces of silver per ounce of gold. The ratio remains elevated compared to its typical range, but it has only just begun to come down from the annual high near 74 that it touched last week. A falling ratio means silver is outperforming gold, and a sustained move lower would point to improving appetite for the more volatile of the two metals.
Looking ahead, attention turns to the FOMC decision on Wednesday, October 28. A hold appears to be largely priced in, so the focus will likely be on the tone of Chair Warsh’s press conference and any hints about a December hike. A hawkish message, combined with elevated oil prices, could keep pressure on gold, while a more cautious tone could give both metals room to recover. Whether silver can hold its recent gains and keep the ratio moving lower will be a key test of the move. For more daily commentary on gold and silver visit this link.
Wishing you as always, good trading,
