The Federal Reserve’s Beige Book, released Wednesday, highlighted modest growth in economic activity, boosting optimism about the resilience of the U.S. economy.
Despite the modest inflation, markets interpreted the report as a sign that the Fed could slow or pause rate cuts, which would support bond yields.
“The Fed’s cautious tone is changing investor sentiment, making non-yielding assets like gold less attractive,” said one market strategist.
The US Nonfarm Payrolls (NFP) data, due on Friday, could further influence the market, with analysts predicting 146,000 new jobs in November. The outcome could determine the Fed’s next policy steps, which will impact gold and silver prices in the near term.
Geopolitical tensions provide limited support
While risk-off sentiment has dampened demand for safe havens, lingering geopolitical concerns are putting a floor on gold prices. The conflict between Russia and Ukraine, coupled with ongoing concerns about trade policy under newly-elected President Donald Trump, has increased investor interest in precious metals.
Silver received some support from geopolitical uncertainties, but faced headwinds from a stronger dollar and higher interest rates.