Silver Spikes as Rate Cut Bets Drive Metals

Key Points

• Silver surged above $80 per ounce for the first time before sliding sharply in volatile trade.
• The dollar index sits near 97.953 and is down 9.7% for the year.

Precious metals saw sharp price swings on Monday as trader positioning collided with thin year-end liquidity.

Silver briefly climbed above the $80-per-ounce mark for the first time before reversing sharply lower, while platinum and palladium also fell after hitting all-time highs.

Gold eased nearly 1%, though it remains close to record territory after repeatedly breaching highs this year.

The moves followed a strong rally driven by expectations that the Federal Reserve will cut interest rates next year. These expectations have weakened the dollar and pushed traders toward hard assets as both yield alternatives and hedges against uncertainty.

Experts at our research desk note that precious metals have benefited from a powerful mix of rate-cut tailwinds and hedging against global and fiscal risks.

They warned that the late-year, near-vertical rise, especially in silver, increases the risk of volatility, with near-term moves likely driven by technical factors and positioning rather than fundamentals.

Dollar Weakness Continues to Support Metals

The US dollar hovered near its lowest level in almost three months, keeping underlying support in place for commodities priced in dollars. The dollar index slipped 0.08% to 97.953 and remains on track for a 9.7% annual decline, its steepest since 2017.

Markets continue to price at least two Fed rate cuts next year, despite the central bank projecting only one more cut in its latest guidance.

This gap between official forecasts and market pricing has weighed on the dollar, helping to fuel demand for precious metals.

The Fed meeting minutes, due on Tuesday, will be closely watched for clues on internal debates regarding the balance of risks and the timing of future easing.

Attention will then turn to labour market data in the new year, with non-farm payrolls expected to play a key role in shaping rate expectations.

Structural Support Remains Despite Pullbacks

While near-term volatility has increased, the broader backdrop for precious metals remains supportive. Supply worries have also added fuel to the rally, particularly in silver.

This environment suggests that pullbacks may attract longer-term buyers rather than trigger sustained reversals, even as short-term traders reduce exposure after steep gains.

Technical Analysis

Silver is pulling back after an aggressive, near-vertical rally that saw prices surge from below $60 to above $77 in just a few weeks.

Despite the sharp drop today, the uptrend remains intact—supported by the steep upward slope of all three moving averages (5, 10, 30 MA).

However, MACD is deeply extended, showing an overbought signal. The histogram is still green, but the widening gap suggests exhaustion may be setting in. A cooling-off period or consolidation is likely before the next leg higher.

Cautious Outlook as Volatility Dominates

Silver’s sharp reversal highlights the risk of further volatility as stretched positioning meets low liquidity. Gold may continue to draw support from dollar weakness and geopolitical hedging, though short-term pullbacks remain likely after repeated record highs.

Broader market direction will hinge on Fed communication and early 2026 labour data, with rate expectations continuing to drive both currencies and commodities.

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