Fed rate path and supply gaps keep gold and silver volatile

Investors are bracing for continued volatility in gold and silver as the Federal Reserve’s stance tightens and supply‑side issues loom.

The Fed’s decision to raise the federal funds rate by 25 basis points, positioning the range at 3.75‑4.00%, signals that further hikes are possible. Market models now assign roughly a 55% probability to another increase in October.

Higher Treasury yields, now above 5%, have pressured non‑interest‑bearing assets, prompting profit‑taking in both gold and silver. Nevertheless, silver performed better, buoyed by expectations of a sixth consecutive year of supply deficits. Analysts estimate a shortfall of about 4.63 crore ounces in 2026.

The crude oil market also played a role. A three‑day slide below $100 per barrel reduced energy‑price inflation fears, offering a temporary boost to gold.

Going forward, the direction of bullion prices will hinge on three key drivers: the Fed’s monetary policy trajectory, global bond‑yield movements, and any escalation in geopolitical tensions that could affect oil supplies.