Gold prices moved higher on Tuesday, drawing support from growing market expectations that the US Federal Reserve will cut interest rates in January. Meanwhile, silver prices, after a recent surge, experienced a slight dip but remained within striking distance of the record peak it achieved last week.
Market Movements and Key Data
Spot gold was up 0.1% at $4,304.92 per ounce in early Asian trading. US gold futures showed little change, trading at $4,333.20 an ounce. The precious metal has delivered a staggering performance in 2025, rallying more than 64% and breaking multiple records to become one of the year's top-performing assets.
In contrast, spot silver fell 0.5% to $63.60 per ounce. This minor pullback follows a dramatic run that saw silver hit an all-time high of $64.65 on Friday before closing lower. Silver has skyrocketed by 121% since the start of the year, fueled by critically low inventories, robust industrial demand, and its recent inclusion on the US critical minerals list.
Other precious metals showed mixed trends. Spot platinum gained 0.8% to $1,797.0 per ounce, while palladium eased 0.3% to $1,561.94.
The Federal Reserve's Influence and Dollar Weakness
The primary driver for gold's strength remains the shifting outlook for US monetary policy. The Federal Reserve, in a divided decision, implemented a 25-basis-point rate cut last week. However, it signaled a potential pause in further reductions due to ongoing inflation concerns and an uncertain labour market.
Market participants are now heavily betting on another cut in January. According to the CME FedWatch tool, investors are pricing in a 76% probability of a 25-basis-point reduction, with some traders anticipating two cuts. This expectation has pressured the US dollar, which sagged to near a two-month low at the start of Tuesday's Asian session. A weaker dollar makes gold cheaper for holders of other currencies, boosting demand.
Adding to the policy debate, Fed Governor Stephen Miran commented on Monday that current above-target inflation readings do not reflect the underlying supply and demand dynamics, which he asserted are generating price increases much closer to the central bank's 2% target.
Focus Turns to US Employment Reports
All eyes are now on crucial US employment data, which is expected to provide significant clues about the Fed's future policy path. The US Bureau of Labor Statistics is set to release combined employment reports for October and November on Tuesday.
However, this data release comes with a major caveat. A recent government shutdown prevented data collection, resulting in key details, including October's unemployment rate, being missing. This will create the first-ever gap in this critical economic data series, adding an element of uncertainty for analysts and traders trying to gauge the health of the American job market.
The non-yielding nature of gold makes it particularly attractive in a low-interest-rate environment, as the opportunity cost of holding it decreases. As the market awaits clearer signals from the jobs data, the precious metals complex is likely to remain sensitive to any hints regarding the timing and pace of the Fed's next moves.
