Market News

(Bloomberg) -- Gold and silver fell as bond yields pushed higher, with traders awaiting cues on monetary policy next year as they look beyond a near-certain rate reduction at the Federal Reserve’s final meeting this year.

Treasury yields were climbing in US trading on Monday, emulating cheapening in most global government bond markets, with investors facing a series of auctions beginning Monday and a Fed rate decision Wednesday that may alter 2026 policy expectations.

Higher rates are typically negative for precious metals like gold and silver that pay no interest.

Kevin Hassett, a leading candidate to take over the role of Fed chair, said it would be irresponsible to lay out a plan for rates over the next six months. The White House National Economic Council director emphasized the importance of following economic data on CNBC Monday.

Swap traders continued pricing in a more than 90% chance of a quarter-point rate cut when the Fed concludes its policy meeting Wednesday.

Bets on further easy money by the US central bank have helped silver rally in recent weeks. The white metal has more than doubled this year, outshining gold’s 60% surge.

The silver market is also dealing with the aftershocks of a historic short squeeze. One-month lease rates — which represent the annualized cost of borrowing metal in London – remain elevated at around 6%, even after a record amount of metal flowed into the world’s biggest silver-trading hub. These flows in turn have put other centers under pressure: Shanghai’s inventories are near the lowest in a decade.

What Bloomberg Strategists Say...

“Silver heads into the week with the potential for greater volatility as the market navigates the Fed’s policy decision and continued tightness in physical supply. A rate cut this week would preserve the conditions that have supported the metal’s outperformance, but stretched positioning leaves prices exposed to sharper swings.”

— Nour Al Ali, Markets Live strategist. For full analysis, click here.

Options on Comex silver futures have also experienced a buying spree as investors position themselves against wider swings and especially further rallies. Retail traders are pouring into the market, with the five-day average volume on micro futures contracts at a level only exceeded in mid-October, CME Group Inc. data showed.

Meanwhile, China’s central bank added to its gold reserves for a 13th straight month, according to data released on Sunday, bringing the total to around 74.12 million troy ounces.

Silver fell 0.5% to $58.05 an ounce as of 10:44 a.m. in New York. Gold fell 0.3%, while platinum and palladium advanced. The Bloomberg Dollar Spot Index was up 0.2%.

--With assistance from Jack Ryan, Yihui Xie and Preeti Soni.