The Precious Metals Week in Review

Silver jumped for a fourth day, as exchange-traded fund inflows, momentum-following and physical market tightness pushed the white metal toward its best year since 1979. The precious metal rose to an all-time high above $64 an ounce on Friday morning, with prices fluctuating wildly. Silver has gained about 10% this week, bolstered by dovish signals from the Federal Reserve, which made an expected rate cut and pointed to signs of weakening in the U.S. labour market. Lower rates are a tailwind for non-interest-bearing precious metals like silver.  

Gold prices are sharply higher in midday U.S. trading Thursday as the yellow metal is riding the strong tailwind of huge daily gains in the silver market that pushed the metal to yet another all-time high. The two precious metals are seeing solid technical buying and are benefiting from a surprisingly dovish lean from the Federal Reserve. Strong losses in the U.S. dollar index that drove it to a six-week low today are also supporting buying interest in precious metals. February gold was last up $65.10 at $4,289.50. March silver prices were up $2.80 at $63.82 and hit an intra-day record high of $64.03.  

The bond market’s reaction to the Federal Reserve’s interest-rate cuts has been highly unusual. By some measures, a disconnect like this, with Treasury yields climbing as the central bank lowers rates, hasn’t been seen since the 1990s. The Fed started pulling its benchmark rate down from a more than two-decade high in September 2024 and has since cut it by 1.5 percentage points to a range of 3.75% to 4%. Yet, key Treasury yields, which serve as the main baseline for the borrowing costs paid by American consumers and corporations — haven’t come down at all. Ten-year yields have risen nearly half a percentage point to 4.1% since the Fed started easing policy and 30-year yields are up over 0.8 percentage point.  

Treasuries were steady following the biggest rally in three weeks, with investors preparing for the Federal Reserve to start buying $40 billion of bills per month on Friday. Yields on U.S. 10-year debt were little changed at 4.14%. Two-year peers were also steady after tumbling the most in two months on Wednesday as the Fed lowered interest rates a quarter-point to a range of 3.5% to 3.75%. “The balance sheet expansion is important,” said Mohit Kumar, chief economist for Europe at Jefferies. “Given that the Treasury is skewing issuance towards T-bills and short end, Fed purchases will be stimulative.”  

Applications for U.S. unemployment benefits rose last week by the most since the onset of the pandemic, underscoring the volatile nature of claims at this time of year. Initial claims increased by 44,000 to 236,000 in the week ended Dec. 6, according to Labour Department data released Thursday. That was the biggest jump since March 2020 and followed the lowest level of applications in more than three years in the previous week, which included Thanksgiving.  

Oil held near its lowest close in almost two months, as concerns about an oversupply offset of bullishness in wider financial markets. Brent traded little changed above $61, reversing an earlier increase. Global stock gauges have record highs in their sights as the Federal Reserve’s interest-rate cut this week and its upbeat assessment of the U.S. economy boosted investor sentiment, but oil markets remain pressured by the prospect of a significant surplus next year.  

EUR/USD is trimming part of its earlier gains, coming under some mild downside pressure near 1.1730 as the U.S. Dollar edges higher. Markets are still digesting the Fed’s latest rate decision, while also looking ahead to more commentary from Fed officials in the sessions ahead.  

The Japanese Yen is slightly weaker versus the U.S. Dollar, underperforming most G10 currencies, as markets await next week’s BoJ meeting where a 25bps rate hike is widely expected. Policymakers signal the potential for further tightening in 2026, keeping USD/JPY range-bound between 154 and 157.