Metals outlook: Markets prepare for blockbuster FOMC meeting

Gold and silver prices held the ground gained by last week’s Thursday and Friday rallies, which propelled spot prices to more than $2,575 and $31 an ounce, respectively.

All eyes this week will be on the Federal Reserve’s 2 p.m. FOMC meeting on Wednesday, during which an expected 25- or 50-basis-point cut will be announced.

Last week, gold and silver prices reacted positively to rumors that the Fed was considering a more significant cut than traders had initially believed.

What to watch

Geopolitical tensions surrounding the war in Ukraine and Israel’s war against Hamas continue to rise, and on Sunday, former U.S. President Donald Trump survived the second attempt on his life in less than two months.

All these occurrences are likely to be positive drivers for precious metals as investors look for less risky investment vehicles during a time of uncertainty.

While the FOMC meeting on Wednesday will be the week’s blockbuster event regarding the impact on global markets, gold and silver investors should consider the possibility of short-term pullbacks after last week’s runup may have been pricing in an aggressive interest rate reduction.

Despite traders pricing in an 85% chance of a 25-basis-point cut compared to a 15% chance of the larger option last week, the CME Fedwatch tool shows an entirely different situation this week. Traders are now expecting about a 59% chance of a 50-basis-point cut.

Recapping last week

Silver outperformed gold last week, rising more than $3 an ounce, or 10%, while gold continued its steady, but less flashy, rally by gaining 3.5%.