A reduction in Fed rate cut odds is hurting gold’s price upside, while the solar industry is working hard to find viable substitutes for the gray metal amid stubbornly high prices, according to precious metals analysts at Heraeus.
In the latest update, they wrote that the chances of a U.S. rate cut at the December Fed meeting are shrinking.
“The market implied that odds of a rate cut had fallen to about 50/50 but are now at a third following the publication of the minutes from the last Fed meeting,” they noted. “They show that the FOMC sees real GDP growth as being modestly stronger while tariffs are expected to put upward pressure on inflation, suggesting that another rate cut is not needed.”
The analysts warned that the market may have overreacted to the downside, as recent jobs data continues to be weak. “The non-farm payroll figures for September showed an employment increase of 119,000, the highest level since April, though this differs from the ADP number, which was a decrease of 29,000,” they said. “The ADP figure for October was a gain of 42,000, but that is still well below the average monthly gains seen during 2024 and earlier in 2025.”
“A rise in the unemployment rate was also reported,” they added. “If the Fed is slower to ease monetary policy, that could be negative for gold.”
Gold prices are gaining on Monday morning after edging lower last week, with the spot price once again challenging the $4,100 per ounce level.
Spot gold last traded at $4,091.28 per ounce for a gain of 0.65% on the session.
Turning to silver, Heraeus analysts noted that a surge in Indian demand for the gray metal last month resulted in an even bigger spike in imports.
“Imports in October were worth over $2.7 billion, equivalent to approximately 56 moz, roughly double the amount imported in September,” they said.
“Another 7.6 moz of silver left COMEX warehouses last week, reducing total inventories to 462 moz, the lowest level since March, as the futures curve stayed slightly backwardated, with the front-month contract trading about 0.5% below the spot price,” the analysts added.
Meanwhile, LBMA inventories rose to 844 million ounces in October from 790 million ounces in September – their highest level in a year – as the prevailing opportunity between the two markets encouraged more metal to flow back to London.
And on the industrial front, Heraeus said that silver use in solar cells is being aggressively reduced in favor of copper, aluminum, or nickel as prices continue to hold near all-time highs.
“Although past concerns suggested that cutting silver too excessively could harm module performance, researchers note that, ‘If silver reduction is carefully engineered with proper design and process control, it does not have to compromise the quality of the solar cells and modules,” they said. “Researchers at Fraunhofer ISE also emphasise that, ‘Considering the currently ongoing enormous price level boost of silver, the pressure on the PV industry to reduce silver is currently very high.’”
Silver prices are also seeing a strong start to the week as they trade near the upper edge of their daily range.
Spot silver last traded at $50.348 per ounce for a gain of 0.65% on the daily chart.
Source: Ernest Hoffman Kitco
