Gold traded lower on Wednesday as a stronger U.S. dollar weighed on the market, with investors trimming short-dollar positions ahead of the Federal Reserve’s highly anticipated policy decision.
The precious metal eased from its recent record high of $3,700 an ounce, but so far, support has held above $3,660. Markets broadly expect the Fed to cut rates by 25 basis points, bringing the target range to 4.0%–4.25%. However, traders are increasingly cautious that the central bank may fall short of delivering the dovish tone markets are hoping for—a scenario that could fuel a deeper dollar rebound and cool the recent risk rally.
Weak U.S. labour market data has bolstered expectations of a string of rate cuts through the remainder of 2025 and into early 2026. Futures markets are pricing in a quarter-point cut at nearly every meeting this year, though analysts warn such aggressive easing is unlikely to be endorsed by Fed Chair Jerome Powell.
Despite short-term uncertainty, market strategist Jesse Colombo believes falling interest rates will continue to underpin higher gold prices well into 2026. Speaking with Kitco News, Colombo forecasted gold could hit $4,000 an ounce and silver could rally above $50 as market volatility returns.
He pointed to two major drivers: compressed volatility and questions around the Fed’s independence. “The loss of Fed independence means that we could see a lot more easing than is necessary,” Colombo said. “All this confusion will continue to support higher gold prices.”
Colombo also highlighted the unusually low levels of the VIX volatility index. Historically, such compressions often precede sharp directional moves. He noted a similar setup earlier this year, when gold surged from $3,300 to near $3,700 as volatility unwound.
Currently, spot gold is trading at $3,687.40, up 7% this month and nearly 40% year-to-date—marking one of its strongest annual performances since the late 1970s. Silver has been an even stronger performer, rising 46% this year to trade above $42 an ounce, though Colombo argues it remains undervalued compared to gold.
“There is just a lot of confusion in the marketplace and everyone is waiting to see what the Fed will do,” he said. “But once clarity comes, my bias is for a weaker dollar and stronger gold. $4,000 gold is still possible before the year is out, given the momentum we’re seeing.”
With both gold and silver benefiting from safe-haven demand, investor appetite for uncorrelated assets is expected to remain strong. As Colombo concluded: “This is the time for gold and silver to shine.”
