Commodity wrap: silver soars to new highs; gold dips as markets await Fed rate decision

Gold prices edged down ahead of the interest rate decision by the US Federal Reserve later on Wednesday.

Meanwhile, silver prices extended its record-breaking rally above the $61 per ounce mark on robust industrial demand and declining inventories.

Oil prices were largely steady as investors waited for the outcome of the US Fed’s two-day policy meeting and progress in the Russia-Ukraine peace talks.

Base metal prices were also in the green as the market expected the Fed to cut rates, which is supportive for demand for metals.

Copper prices are showing strength this morning, trading firmer as markets anticipate the Federal Reserve's policy announcement scheduled for later today.

The metal has regained ground following Tuesday's decline, with the price currently near $11,639, marking a $90 increase.

“The expectation of a third consecutive quarter-point cut is underpinning sentiment, but the real focus will be on the Fed’s forward guidance,” Neil Welsh, head of metals at FCA-regulated multi-asset brokerage Britannia Global Markets, said in an emailed commentary.

Gold down

Gold prices dipped as investors waited for a US Federal Reserve rate cut and sought signals regarding the central bank's future policy direction.

A 25-basis-point rate reduction is highly anticipated (with an 88% market probability) as the Federal Open Market Committee (FOMC) concludes its two-day policy meeting.

The rate cut announcement is scheduled for 1900 GMT, followed by a speech from Chair Jerome Powell at 1930 GMT.

The yield on the benchmark 10-year US Treasury has climbed to its highest point in over three months, which further weighed on gold.

‘A quarter-point rate cut appears to be a done deal. Traders are likely to focus on the Fed’s outlook for monetary easing into 2026,” said David Morrison, senior market analyst at Trade Nation.

At the time of writing, the COMEX gold contract was at $4,225.55 per ounce, down 0.3% from the previous close.

Silver hits record high

Silver’s record-breaking rally seems to be never-ending as the metal crossed $61 per ounce for the first time on COMEX.

“Buying interest has been intense, supported by lingering supply tightness and strong ETF inflows. But the daily MACD indicates that it is once again entering seriously overbought territory,” Morrison said.

Silver's explosive surge this year, more than doubling its price and significantly outperforming gold's substantial 60% gain, underscores a warning: the metal may have risen too much, too quickly, according to Morrison.

The contrasting momentum—gold's steadiness versus silver's volatility—remains the defining characteristic of the precious metals market this week.

The rally has been driven by a strong combination of industrial demand and increased investment.

Significant inflows into exchange-traded funds, as investors sought silver exposure, boosted momentum, which was further amplified by speculative positioning.

“The metal’s dual role as both an industrial input and a store of value has made it particularly attractive, with manufacturers racing to secure supplies while investors increasingly view it as a cheaper alternative to gold,” Britannia Global Markets’ Welsh said.

At the time of writing, the March silver contract on COMEX was at $61.725 per ounce, up 1.5% from the previous close.

Oil steady

As investors monitored developments in Russia-Ukraine peace negotiations and anticipated the forthcoming US interest rate decision, oil prices held steady on Wednesday.

According to API figures cited by market sources on Tuesday, US crude inventories decreased last week by 4.78 million barrels.

In contrast, gasoline stocks saw a significant increase of 7 million barrels, and distillate inventories grew by 1.03 million barrels. Official government data is expected at 1530 GMT.

Amid expectations of a cooling labor market, markets were anticipating that the Fed would reduce its main interest rate by a quarter of a point on Wednesday.

Despite the potential for lower interest rates to stimulate oil demand by fostering economic growth, oil price gains are limited by concerns that supply may exceed demand.

ING analysts noted that the oil market is increasingly moving toward a projected surplus, yet Russian supply continues to pose a risk.

“Our base case remains that Russia will find ways to work around the latest US sanctions,’ Warren Patterson, head of commodities strategy at ING Group, said in a note.

Meanwhile, President Volodymyr Zelenskiy of Ukraine announced that his nation and its European allies are set to shortly present the US with "refined documents" detailing a peace plan to conclude the conflict with Russia.

The removal of international sanctions on Russian companies is a potential outcome of a peace deal between Ukraine and Russia, which could subsequently lead to the release of restricted oil supply.

At the time of writing, the price of West Texas Intermediate crude oil was at $58.35 per barrel, up 0.2%, while Brent was at $62.02 per barrel, up 0.1% from the previous close.