Precious Metals Rally on Fed Rate Cut Speculation, But Sustainability in Question

Gold and silver opened the week with strong gains as weaker-than-expected U.S. jobs data fueled expectations of a Federal Reserve rate cut by September. Gold traded NEAR $3,400/oz, approaching its June 2025 peak, while silver surged to $39.40/oz - its highest level since 2011.

The July jobs report showed unemployment rising to 4.2%, increasing the probability of monetary easing to over 90%. Analysts at Citi project Gold could reach $3,500-$3,600/oz in 2025 amid persistent inflationary pressures from tariffs and slowing growth. However, resistance at $3,420/oz triggered profit-taking, suggesting the rally may face headwinds from upcoming economic data or hawkish central bank commentary.

Silver's outperformance continues, with a 36% year-to-date gain compared to gold's 31%. HSBC revised its 2025 average price forecast to $35.14/oz, citing structural market deficits exceeding 206 million ounces. The gold-silver ratio compression from 105 to 87 indicates strong momentum, though technical indicators suggest the rally may be overextended.