In its latest quarterly metals report published Wednesday, Sucden Financial said gold could face further near-term weakness despite holding critical support above $4,000 an ounce. Silver faces greater downside risks as elevated interest rates weigh on investment demand and declining industrial consumption reduces support from the physical market.
Although the Federal Reserve is expected to leave interest rates unchanged Wednesday, markets see a nearly 80% chance of a rate hike in December.
Despite the near-term pressure, Sucden expects both metals to stabilize in early 2027 as the Federal Reserve approaches the end of its tightening cycle. The firm forecasts gold recovering to between ,200 and ,300 an ounce by mid-January, while silver could rebound to between and an ounce.
The analysts said the ongoing conflict in Iran has created a challenging environment for precious metals. Rising energy prices are intensifying inflationary pressures, keeping US Treasury yields and the US dollar elevated. The Kitco Global Index tracks how much of the daily movement in gold prices reflects changes in the dollar and how much comes from the gold market itself.
Rather than attracting stronger safe-haven demand, gold has struggled as investors focus on the inflationary consequences of the Middle East conflict and its implications for US monetary policy.
“The final quarter of 2026 has brought renewed macro pressure to commodity markets, with the Iran conflict pushing energy costs higher and complicating the outlook for monetary policy,” the analysts said in the report.
Sucden noted that Brent crude oil prices above $110 a barrel have raised the opportunity cost of holding non-yielding assets such as gold and silver. Although geopolitical uncertainty would traditionally support safe-haven demand, the inflationary impact of the conflict has become the dominant influence on precious metals.
The firm warned that persistently high energy prices could force the Federal Reserve to tighten monetary policy further.
The outlook comes as the US economy continues to demonstrate resilience despite emerging signs of weakness in the labour market. Sucden estimates that economic growth reached approximately 3.5% in the third quarter, supported by investment in artificial intelligence and relatively healthy consumer spending.
At the same time, headline inflation rose to 3.7% in September, while producer prices recorded their largest monthly increase since 2022.
For gold and silver, the combination of slowing employment growth and persistent inflation presents a difficult environment. Weaker economic activity would normally strengthen expectations of lower interest rates, but the energy-driven inflation shock is limiting the Federal Reserve’s ability to ease monetary conditions.
Despite these headwinds, Sucden said gold continues to benefit from relatively strong underlying investment demand, particularly from central banks and exchange-traded funds.
The analysts estimated that central banks purchased 289 tonnes of gold in the second quarter, including unreported transactions. Although purchases during the first half of the year were the weakest since 2022, official-sector demand has strengthened in recent months.
“Official-sector demand continues to provide the clearest fundamental floor,” the analysts said.
China remains a major buyer, with the People’s Bank of China adding 23 tonnes of gold to its reserves in September. The purchases took its year-to-date accumulation to 103 tonnes and extended its buying streak to 23 consecutive months.
Poland also remains an important source of demand. However, Sucden warned that purchases could slow as the country’s gold reserves approach its 700-tonne target.
Investment demand has also remained resilient. According to Sucden, global gold-backed ETF holdings reached a record 101.55 million ounces in mid-October and have remained close to 101 million ounces despite the recent price decline.
Speculative investors, however, have become increasingly cautious, with managed-money net-long positioning falling to a four-month low.
The analysts said the divergence indicates that longer-term investors continue to accumulate gold during periods of weakness, while short-term traders remain reluctant to establish significant bullish positions.
Although central bank and ETF purchases should help cushion further declines, Sucden warned that neither source of demand is likely to offset another hawkish repricing of US monetary policy.
The firm added that a sustained recovery above $4,300 an ounce would likely require a more pronounced decline in oil prices, Treasury yields and the US dollar.
Silver faces greater downside risks as industrial demand weakens
While gold continues to benefit from central bank accumulation, Sucden said silver faces a more challenging outlook because of its greater sensitivity to interest rates and weakening industrial consumption.
Silver prices have already fallen sharply from their January record high of $121.62 an ounce. The metal entered the final week of October trading near $54 an ounce, approximately 55% below its peak.
During the week ending October 23, silver futures fell nearly 6%, compared with a decline of roughly 4% in gold. The difference highlights silver’s greater vulnerability to changing expectations for monetary policy.
The gold-to-silver ratio subsequently widened to approximately 74, reflecting gold’s relative outperformance.
Sucden noted that silver rallied 15.6% in August after weaker US employment data reduced expectations for additional monetary tightening. Prices subsequently declined around 8% following Federal Reserve Chair Kevin Warsh’s hawkish Jackson Hole speech and the central bank’s September rate increase.
Beyond monetary policy, weakening industrial demand is reducing support from the physical market.
Citing data from the Silver Institute’s World Silver Survey 2026, the analysts said industrial silver fabrication is expected to decline 3% this year to 639.6 million ounces, representing approximately 57% of total demand.
The sharpest weakness is expected in the solar sector, where silver consumption is forecast to fall 19% to approximately 151 million ounces. Manufacturers are reducing the amount of silver used in photovoltaic cells and increasingly adopting copper-based technologies.
Although demand from electric vehicles, power grids and data centres continues to expand, Sucden said these sectors are unlikely to fully offset declining solar consumption and weaker demand for jewellery and silverware.
The global silver market is expected to record its sixth consecutive annual deficit, with demand exceeding supply by approximately 46 million ounces.
Despite relatively supportive underlying supply-and-demand fundamentals, Sucden said the modest shortfall is unlikely to offset the near-term impact of restrictive monetary policy.
The firm also reported mixed investment demand heading into year-end. Silver-backed ETFs hold approximately 805.8 million ounces following net selling this year, contrasting with continued accumulation in the gold market.
Hedge funds remain only modestly net long, while declining COMEX registered inventories and limited freely available silver in London could leave the market vulnerable to renewed physical tightness.
According to the analysts, relatively light speculative positioning could create conditions for a sharp short-covering rally if the Federal Reserve adopts a less hawkish stance.
However, a sustainable recovery in silver, like that in gold, will likely depend on investors becoming more confident that the central bank has completed its tightening cycle. Until then, restrictive monetary conditions, persistent inflation and weakening industrial consumption are expected to remain key factors shaping the outlook for both precious metals.
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