Gold has spent the last week proving that it is not a relic, it is a barometer. Even after traders sold into the Federal Reserve’s second 25 basis point cut of the year and briefly knocked spot down toward $3,960 dollars, the market refused to stay below $4,000 for long, exactly as Kitco described when it wrote that the metal was “bouncing around 4,000 an ounce” after the decision. (kitco.com) What we saw on October 29 was not simple profit taking. It was the market trying to price two rival stories at once. One story says the Fed is easing because growth and the labor market are slowing, which is bullish for metals. The other says the Fed is cutting into inflation that just reaccelerated to 3.0% in September, which is also bullish for metals, but for a different reason. (Bureau of Labor Statistics)
The Fed created that tension itself. By moving the target range to 3.75% to 4.00% while hinting that future cuts are not guaranteed, the central bank lowered the carrying cost of non-yielding assets, then immediately tried to claw back part of that benefit with its forward guidance. The result was a short burst of dollar strength that temporarily muted the textbook metals rally after a cut. Reuters captured it well when it noted that gold had “fallen over 3 percent so far this week” even though it was up more than 50% for the year. (Reuters) In other words, policy got easier, but the Fed asked the market not to get too excited about it. That is exactly the kind of mixed message that keeps a hard asset bid alive.
From the seat of Royal Leo Holdings, the underlying problem is obvious. Inflation has stopped falling and is now stuck around 3%. The Fed is cutting anyway. That means the real return the dollar offers is shrinking again. A dollar that pays less, while still losing 3% of purchasing power every year, is a poor rival for an asset that has no counterparty risk and that central banks have been buying at the fastest pace since the 1970s. HSBC said two weeks ago that “ongoing geopolitical tensions” and rising official sector demand could push gold to $5,000 dollars in 2026. (Reuters) Morgan Stanley is talking about $4,500 dollars by mid 2026. Reuters reported that Wells Fargo has already lifted its 2026 target to $4,500 – $4,700 dollars. (Reuters) These are not fringe newsletters. These are large institutions telling clients that the ceiling is higher than they assumed.
Silver is telling the same story, but in a more dramatic voice. It jumped on the Fed decision, trading back toward $48 dollars as safe haven buying returned and the dollar backed off. FXStreet reported that silver gained about 2.5% on Wednesday in exactly that fashion. (FXStreet) At the same time, other outlets reminded readers that a stronger dollar on the following day pushed both gold and silver lower again. (FinancialContent) This is what an emerging bull market looks like in the white metal. Supply has been in deficit for several years. Industrial demand from solar, EVs and electronics is sticky. Investors are watching gold at or near $4,000 dollars and asking themselves if silver at the equivalent of an upscale dinner really makes sense. That is why analysts quoted by Reuters see silver averaging $50 dollars in 2026 even though the metal has already rallied sharply. (Reuters)
The hedge argument is therefore not theoretical. We have inflation still running at 3%. We have tariffs and energy costs working against the Fed. We have a central bank that is under political pressure and is trying to protect employment, not just the value of the currency. We also have a dollar that no longer rewards patience like it did in 2023 and 2024. In this environment, gold at $4,000 is not only a response to current price levels. It is the market assigning a premium to something that is outside the reach of monetary experiments. That is why Kitco could run a headline about gold “consolidating” below $4,000 instead of “collapsing” below it. The floor has moved up. (kitco.com)
What, then, does the latest Fed cut actually mean for prices over the next three to six months? First, it keeps the path open for another leg higher. Lower policy rates usually translate into lower real yields, and precious metals trade on real yields more than on anything else. BullionExchanges reminded readers this week that “a rate cut typically lowers the U.S. dollar and Treasury yields, which can boost the gold price.” (Bullion Exchanges) Second, the public argument inside the Fed about how far to cut matters. When investors hear that regional Fed presidents want to move slowly because inflation is not beaten, they hear confirmation that the price level is going to keep eroding for longer than politicians are admitting. That makes the inflation hedge narrative stronger, not weaker. Third, every cut the Fed makes while inflation is still running at 3% tells foreign reserve managers that the United States is once again prioritizing growth and employment over the purchasing power of its currency. That is why central bank buying has been the quiet engine behind this year’s move, as Morgan Stanley and HSBC both noted. (Morgan Stanley)
Silver could actually benefit even more from this policy mix. It is both a monetary metal and an industrial one. Lower U.S. rates help the dollar side of the story. Any sign of fresh fiscal stimulus or recovering global trade, like the progress in U.S. China talks that briefly weighed on gold on October 28, would help the industrial side. Reuters wrote that gold dipped because those talks “dimmed its safe haven allure,” but silver held up better because industrial demand suddenly looked less fragile. (Reuters) When two thirds of your demand profile are cyclical, a Fed that wants to defend growth is your friend.
The case for caution is price itself. A market that has risen 50% in a year is vulnerable to sharp, news driven drops. The MarketMinute piece on October 31 warned that any hint of a pause in rate cuts could trigger more profit taking. (FinancialContent) We saw exactly that the day after the Fed decision when a firmer dollar and Chair Powell’s careful tone knocked gold back under $4,000. (Bitget) This kind of volatility is not a reason to abandon metals. It is a reason to size positions properly, layer in purchases on weakness, and pair gold with silver so that you are exposed to both the monetary and industrial drivers.
For Royal Leo Holdings, the policy conclusion is simple. The Fed just told the world that it is willing to ease into a 3% inflation environment in order to protect growth. That keeps the long term backdrop for both gold and silver bullish. It does not guarantee a straight line higher. It does say that every two or three dollar daily swing should be read through the lens of a central bank that is slowly eroding the real return on cash while public debt is rising and while foreign buyers are shifting reserves into bullion. In that setting, the metals are not just a hedge. They are a parallel balance sheet.
Disclaimer: Royal Leo Holdings, LLC is not a registered financial advisor. All content on this site is provided for informational and educational purposes only and represents our own opinions—not financial advice. You should consult a qualified professional before making any investment decisions.
