Federal Reserve personnel changes trigger adjustments, gold and silver experience a correction wave

The precious metals market has recently experienced intense volatility, highlighting the profound impact of policy expectations on gold prices. Gold briefly touched a high of $4,550 during trading but then sharply declined, closing below the $4,500 mark, with a single-day drop of over $200 to $4,302. Silver’s rally was also unstable—after surging more than 10% last Friday (December 26), it opened on Monday (December 29) with an upward gap to $83.75 but ultimately gave back all gains, falling 15% from its high to $72.0.

Policy Expectation Reversal Becomes a Key Turning Point

Market focus is on Trump’s announcement in the first week of January regarding the new Federal Reserve Chair. Widespread industry expectation is that former Fed Director Kevin Woeh will be appointed, and JPMorgan’s strategic public support further stabilizes market confidence. This development effectively alleviates concerns about the Fed’s independence being undermined and long-term interest rates soaring.

As aggressive rate cut expectations are ruled out, the US dollar index has stabilized around the critical support level of 98.0. Precious metals have lost their previous upward momentum and are now facing profit-taking pressures. This reflects a reassessment of market expectations for easing policies.

Improved Trade Outlook Stabilizes Expectations

Bank of America CEO Moynihan stated that trade disputes are expected to ease rather than escalate by 2026. The bank forecasts an average tariff rate of about 15%, with higher tariffs imposed on countries that do not commit to purchasing American goods or reducing non-tariff barriers. Although the situation with China and North American trade partners requires further assessment, the global landscape suggests that the trade war is gradually winding down. Such positive signals weaken market demand for safe-haven assets.

Re-evaluating the Logic Behind Precious Metal Rises

Recent gains in gold and silver are mainly driven by structural supply shortages, industrial demand support, and expectations of Fed easing. The core logic behind gold’s rise reflects a re-pricing of the long-term structural deficit in the US—gold essentially represents a direct reflection of US dollar creditworthiness. Silver, with its dual monetary and industrial attributes, more prominently demonstrates its value.

The gold-silver ratio has rapidly fallen from 103.36 on April 20 to 58.98, hitting a near 13-year low. This compression indicates that silver is outperforming gold more strongly. From a long-term perspective, if the ratio further drops to 15, silver could challenge $300; however, in the short term, considering the recent decade-low of 70, the silver price appears overbought. Investors should be cautious of the risk of silver’s rally slowing when the gold-silver ratio approaches the 50 level.

Technical Indicators Signal Short-term Correction Risks

The daily chart for silver shows that after breaking through $75, prices accelerated upward, briefly surpassing the $80 level to reach a high of $83.75. The rapid ascent has led to technical overbought conditions that need correction. The market should pay close attention to this critical timing around December 30, warning of a potential short-term reversal.

The current decline in gold prices reflects a confluence of policy expectations, economic outlook, and technical factors, indicating a correction phase. Investors should remain vigilant and observe subsequent developments carefully.