After testing all-time highs last week, gold and silver have pulled back towards their recent consolidation levels as markets continue to weigh up the risks of a potential AI bubble and expectations for a US rate cut.

Gold is trading within the $4,000 - $4,100 per ounce range of the past four weeks after last weeks attempts to push beyond $4,200 ran out of steam. In GBP, gold is around £3,100 this morning, towards the higher end of it’s consolidation range thanks to some sterling weakness ahead of the UK’s Autumn Budget next week. In euros, gold is also sitting comfortably in its recent range at €3,520.07 this morning.

201125 USD Chart

Silver made another effort to break past $52 this week, but has pulled back to $51 at the time of writing. This leaves the metal up still on the $48 level seen in recent weeks, but so far the new all-time high above $54 is proving a key resistance level. Reports of silver being drained from the Shanghai Futures Exchange’s vaults, and repeated bouts of backwardation (spot prices for silver being higher than futures prices) shows demand for physical silver is still outstripping supply, which should continue to support prices.

There have been two key drivers for markets this week, ongoing fears surrounding a potential AI bubble correction, and expectations for the Federal Reserve’s next FOMC meeting in December.

After several days of choppy trading, a stronger-than-expected earnings report from market juggernaut Nvidia reassured markets that the AI bubble is not bursting yet. Both earnings and forecasts from Nvidia were higher than predicted, and have seen stock indexes jump higher today.

The release of the minutes from the last FOMC meeting show the Federal Reserve remains split on the direction of travel for US rates. Some members argue that rates remain too high with the US economy and job market weakening, while others believe that inflation remains sticky and that the US economy is holding up, leaving breathing room for rates to remain higher for now.

Market expectations for a rate cut in December have now fallen as a result, with the CME FedWatch tool showing a 68.2% chance of no change to US rates next month. Just last week, markets saw only a 44.1% chance for no change, showing how perceptions are now turning hawkish once more. The US dollar index has gained almost 1% in the past five days as markets shift to expect rates to remain higher for longer. This gain in the US dollar has of course also impacted gold and silver, contributing to their pull back from last week’s rally.

Following the end of the US government shutdown, today will see the delayed non-farm payrolls report for September. If the report shows the US job market weakening, there could be a swing back towards higher rate cut hopes for December, weakening the dollar, and pushing gold and silver higher. If the report shows a resilient job market, that could further cement no change to US rates in December, and see gold and silver pull back further.