Precious metals have maintained their upward trajectory, with the main contract for silver (SHFE:2602) closing at 15,521 yuan per kilogram yesterday, marking a 3.44% gain while shedding 25,600 open interest positions. Meanwhile, the main gold contract (SHFE:2602) settled at 980.50 yuan per gram, with open interest declining by 372 lots.
The recent rally in precious metals aligns with expectations of monetary easing. In December, the U.S. Federal Reserve cut interest rates by 25 basis points as anticipated, lowering the federal funds rate target range to 3.50%–3.75%. This marks the third rate cut this year, following reductions in September and October, each by 25 basis points. Fed Chair Jerome Powell emphasized a data-dependent approach, stating that monetary policy remains flexible. While inflation remains elevated, core inflation—excluding tariff-driven pressures—has shown notable improvement. Without new tariffs, goods inflation is expected to peak in Q1 2026. With rates now at the upper end of the neutral range, policy is transitioning from restrictive to neutral. Overall, uncertainty around the timing of rate cuts has gradually diminished as a bearish factor for precious metals.
Additionally, beyond the expected December rate cut, the Fed’s monthly purchases of approximately $40 billion in short-term Treasury bills may fuel expectations of further monetary easing, contributing to the recent strength in precious metals. On the supply side, silver spot markets remain tight. Although LBMA silver inventories have seen a slight rebound, SLV silver ETF holdings continue to keep deliverable stocks low, further amplifying price gains amid macro-driven demand.
Precious metals continue to trade as a hedge against dollar-denominated assets, bolstered by concerns over bubbles in other risk assets. Gold and silver remain key safe-haven choices for risk-averse capital. While the outlook for both metals remains cautiously bullish, silver’s repeated record highs warrant caution against profit-taking risks amid potential volatility.
Risk Warning: Fluctuations in the U.S. dollar. Investment Advisory License: CSRC Permit [2011] No. 1289.