Gold, Silver Hit Record Highs on Fed Rate Cut Bets
Precious metals surge as a weaker dollar and hopes for looser monetary policy fuel a rally in safe-haven assets, even as stocks continue their year-end climb.
Gold and silver prices surged to all-time highs in holiday trading, as investor expectations for significant Federal Reserve interest rate cuts in the coming year pushed the U.S. dollar to multi-month lows and ignited a rally in precious metals.
Spot gold climbed to a record peak of over $4,525 an ounce on Tuesday, capping its best year since 1979 with a gain of roughly 72% in 2025. Silver was an even more dramatic outperformer, rocketing to an unprecedented $72.70 an ounce. The move marks silver’s best year on record, with a staggering 154% increase year-over-year.
The rally is largely fueled by a conviction that the Federal Reserve’s monetary tightening cycle has ended. After the central bank executed its third consecutive rate cut earlier this month, markets are now pricing in a series of further reductions in 2026. Lower interest rates decrease the opportunity cost of holding non-yielding assets like gold and silver, increasing their appeal.
Compounding the effect is the sustained weakness in the U.S. dollar. The dollar index (DXY), which measures the greenback against a basket of major currencies, is on track for its worst annual performance in over two decades. A weaker dollar makes commodities priced in the currency, such as gold, cheaper for international buyers, further stoking demand. The bearish sentiment surrounding the dollar continues despite minor fluctuations, as noted in recent market analysis.
Notably, the surge in safe havens is occurring in concert with a powerful rally in equities. In what is typically a quiet period for markets, the S&P 500 has extended its winning streak, closing at a new all-time high of 6,932.05 on Christmas Eve. This simultaneous climb in both risk assets and traditional safe havens suggests a broad-based optimism fueled by liquidity expectations, rather than a simple rotation out of stocks and into metals.
Still, a divergence remains between market hopes and central bank guidance. While investors are pricing in aggressive easing, some analysts caution that the Fed's own projections remain more conservative. A recent commentary from Moody's offered a more sobering view on the pace of 2026 rate cuts, highlighting a potential source of volatility if upcoming economic data does not support the market's dovish narrative.
As 2025 draws to a close, investors are celebrating gains across asset classes but will be keenly watching for economic reports in the new year to validate bets on a significant monetary pivot from the Federal Reserve.