Market Rally in Gold and Silver Amid Rate Cut Expectations—Here's What's Driving the Moves

Precious metals staged a significant rally on Tuesday as investors repositioned ahead of anticipated monetary policy shifts. March COMEX silver climbed +2.435 points (+4.17%), reaching contract highs and all-time peaks around $60.52 per troy ounce, while February gold futures advanced +18.50 (+0.44%). The momentum reflects growing conviction that central banks are preparing to ease financial conditions—a backdrop that historically strengthens safe-haven assets and commodities priced in the dollar sign symbol.

The Dollar’s Mixed Picture: Strength Meets Rate-Cut Headwinds

The dollar index ticked up +0.11% on Tuesday, supported by short covering heading into the Fed’s two-day policy meeting concluding Wednesday. A significant catalyst came from October JOLTS job openings, which unexpectedly surged by 12,000 positions to reach 7.670 million—a five-month high and a hawkish signal that surprised markets expecting declines to 7.117 million. However, this strength faces limits as traders price in a 90% probability of a 25 basis-point rate cut by the FOMC after Wednesday’s conclusion.

Looking ahead, uncertainty over Fed leadership adds another layer of complexity. President Trump indicated he will name a new Fed Chair in early 2026, with Bloomberg reporting that National Economic Council Director Kevin Hassett remains the leading candidate. Such a nomination would likely weigh on the dollar given Hassett’s dovish reputation and alignment with the administration’s lower-rate preferences, potentially undermining dollar sign symbol strength.

Divergent Central Bank Paths: The EUR/USD and USD/JPY Stories

EUR/USD retreated -0.05% Tuesday as the euro faced pressure on two fronts. German trade data disappointed, with October exports expanding just +0.1% month-over-month (expectations: +0.2%) while imports contracted -1.2% m/m versus forecasts of -0.5%. These softer figures highlight eurozone economic challenges at a time when the ECB has already completed its rate-cutting cycle. This policy divergence—where the Fed continues easing while the ECB holds steady—naturally limits downside in the euro despite Tuesday’s dollar strength.

The yen proved more vulnerable, with USD/JPY jumping +0.60% to two-week lows. BOJ Governor Ueda’s comments drove the decline, noting that recent long-term bond yield increases are “somewhat fast” and the central bank could escalate bond purchases in exceptional circumstances. His remarks also affirmed progress toward sustainable 2% inflation, signaling the BOJ may hike rates at its December 19 meeting—a 90% probability priced by markets. Separately, November machine tool orders in Japan climbed +14.2% year-over-year, marking five consecutive months of growth. The stronger-than-expected US jobs data, which pushed Treasury yields higher, accelerated yen selling Tuesday.

Why Precious Metals Are Running: A Confluence of Tailwinds

The rally in gold and silver reflects multiple supportive dynamics. First, the 25 basis-point Fed cut expected Wednesday removes headwinds from higher real yields, making non-yielding assets more attractive. Second, safe-haven demand persists amid lingering geopolitical tensions in Ukraine and the Middle East, plus unresolved questions around potential US tariffs.

Central bank behavior provides structural support. Chinese authorities raised PBOC gold reserves by 30,000 ounces in November to 74.1 million troy ounces—the thirteenth consecutive month of accumulation. Globally, central banks purchased 220 metric tons of gold in Q3, up 28% from Q2, according to the World Gold Council. Silver specifically benefits from tight Chinese inventories; Shanghai Futures Exchange warehouse stocks fell to 519,000 kilograms on November 21, hitting a decade low.

One caveat: ETF positioning shows mixed signals. After reaching three-year highs on October 21, holdings subsequently declined due to profit-taking. However, silver ETF long positions recently rebounded to a 3.25-year high last Friday, suggesting renewed institutional appetite.

The dollar’s Tuesday gains—a typical headwind for commodities priced in greenbacks—and higher Treasury yields from the strong jobs data provided temporary resistance. Nevertheless, the structural case for precious metals remains intact, with the 90% probability of an imminent Fed rate cut anchoring expectations for continued support.