Sucden Financial predicts gold may test $3,900 support and silver could slip to $50 as Fed tightening continues

Analysts at Sucden Financial said gold is likely to test support near $3,900 an ounce ahead of the Federal Reserve's December policy meeting, while silver could retreat to $50-$53 per ounce as tighter monetary conditions dampen investment demand. The firm expects the Fed to keep rates unchanged at its upcoming meeting, though markets assign an almost 80% probability of a rate hike later in the year.

Despite the near-term bearish outlook, Sucden projects both metals to stabilise in early 2027 as the Fed approaches the end of its tightening cycle. It forecasts gold rebounding to $4,200-$4,300 by mid-January and silver rising to $57-$60.

The analysts highlighted that the ongoing Iran conflict is keeping energy prices high, which sustains elevated U.S. Treasury yields and a strong dollar, reducing the appeal of non-yielding assets such as gold and silver. Brent crude trading above $110 a barrel has increased the opportunity cost of holding these metals.

"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 report said.

U.S. economic data show growth of about 3.5% in the third quarter, with headline inflation at 3.7% and a modest slowdown in hiring, creating a mixed environment for monetary policy. Persistent inflation driven by energy costs limits the Fed's ability to ease rates.

Gold, however, continues to benefit from central-bank buying and exchange-traded-fund (ETF) accumulation. Sucden estimated central banks purchased roughly 289 tonnes of gold in the second quarter, with China adding 23 tonnes in September, extending a 23-month buying streak. Global gold-backed ETFs held a record 101.55 million ounces in mid-October.

Speculative positioning, however, has weakened, with managed-money net-longs at a four-month low, suggesting short-term traders are cautious despite long-term investors accumulating the metal.

Silver faces greater downside risk because of its sensitivity to interest rates and a decline in industrial demand. Prices have fallen from a January peak of $121.62 to around $54 per ounce, with futures down nearly 6% in the week to October 23. The gold-to-silver ratio widened to about 74.

Industrial silver consumption is expected to drop 3% this year, driven by a 19% fall in the solar sector as manufacturers shift to copper-based technologies. Although demand from electric vehicles, power grids and data centres is growing, it is unlikely to offset the decline in solar use and weaker jewelry demand.

The global silver market is projected to record its sixth consecutive annual deficit, with demand exceeding supply by roughly 46 million ounces. Investment demand for silver remains mixed, with ETFs holding about 805.8 million ounces after net selling this year.

Sucden cautioned that a sustained recovery above $4,300 for gold would likely require a notable decline in oil prices, Treasury yields and the dollar, while a less hawkish Fed stance could trigger a short-covering rally in both metals.