Gold, silver slide on Fed outlook; oil drops as IEA flags potential 2026 supply glut

Gold and silver retreated sharply on Thursday, with spot gold falling more than 3 per cent to $4,920/oz and silver plunging 10 per cent to $75/oz, driven by renewed weakness in U.S. technology stocks and shifting expectations around Federal Reserve policy following firmer U.S. labour data.

U.S. jobless claims declined to 227,000 in the week ending February 7, down from 232,000 previously, while the four-week average held steady near 219,500. Together with the recent strong non-farm payrolls report, the data reinforced expectations that the Fed will maintain a steady policy stance. Reduced bets on a July rate cut outweighed the impact of softer Treasury yields.

Meanwhile, easing geopolitical tensions, particularly around Russia-Ukraine and renewed U.S.-Iran nuclear discussions, dampened safe-haven demand. Silver faced additional pressure from weak U.S. existing home sales and concerns over softer Chinese industrial demand ahead of the Lunar New Year shutdown.

“Today, silver has rebounded 5 per cent to trade near $79/oz, gold has also recovered to $4,990/oz as markets turn their focus to upcoming U.S. CPI data. Softer inflation readings could revive expectations of policy easing and provide much-needed stability to bullion prices while persistent inflation and a resilient labour market could keep the Fed on a “higher-for-longer” trajectory, keeping prices under pressure. An extended rout in U.S. technology stocks remains an additional downside risk,” said Kaynat Chainwala, AVP Commodity Research, Kotak Securities.

WTI crude oil prices fell 3 per cent on Thursday to close at $62.8/bbl, pressured by easing geopolitical tensions and renewed concerns over a potential supply surplus. The International Energy Agency (IEA) expects global oil demand growth to slow more than previously forecast this year and warned that the market could face a sizeable surplus of approximately 3.73 million barrels per day in 2026, despite supply disruptions seen in January.

Oil prices trade near $63/bbl today amid subdued global risk appetite and a reduced likelihood of near-term military escalation after U.S. President Donald Trump indicated that negotiations could extend for up to a month. Although the WTI prompt spread, the difference between the first two futures contracts, remains in backwardation, narrowing spreads suggest that near-term supply conditions are becoming relatively less tight.