Guotai Junan Futures: The interest rate meeting was calm and uneventful; why are precious metals still unable to halt their decline?

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Author: Guotai Junan Futures Market Analyst Zhang Chining Z0020302

At the early hours of today Beijing time, the Federal Reserve announced its March FOMC interest rate decision. Overall, this meeting did not signal any hawkish surprises beyond market expectations: the dot plot maintained the path forecast of one rate cut in 2026 and 2027; Fed Chair Powell also clearly stated in the press conference, “The vast majority do not see rate hikes as the baseline expectation,” which somewhat eased market concerns about a policy shift toward tightening in the short term. However, this “in line with expectations” outcome did not fully offset the shock from earlier unexpectedly high inflation data—amid the backdrop of February PPI soaring to 3.4% year-over-year, precious metals had already been sold off before the meeting. Although the rate decision did not further deepen the decline, market sentiment remained cautious, and precious metal prices did not receive significant support.

FOMC Rate Decision Announcement

The Federal Open Market Committee (FOMC) voted 11-1 to keep the federal funds rate target range unchanged at 3.50%-3.75%, marking the second pause since the rate cut in December last year. The sole dissenting vote came from Governor Mester, who favored a 25 basis point cut. Overall, the decision aligned with market expectations.

After the rate announcement, market expectations for the near-term policy path remained largely unchanged. According to CME’s “FedWatch” tool, the market assigns a 96.9% probability that the Fed will hold rates steady at the April meeting, and a 14.4% chance of a 25 basis point cut by June, slightly lower than before the decision.

Powell’s Remarks: Downplaying Rate Hikes, Focusing on Inflation Uncertainty

In the subsequent press conference, Powell’s tone was generally neutral, with key points as follows:

1. Rate Outlook: The policy rate is already at the high end of the neutral zone, even slightly restrictive. He emphasized that if inflation does not further progress, there will be no rate cuts. While the possibility of future rate hikes was mentioned, “the vast majority do not see rate hikes as the baseline expectation.”

2. Inflation Outlook: Acknowledged that recent energy price increases will push up overall inflation, but it’s too early to judge the extent. He believes this energy shock may be a one-time event, and whether energy-driven inflation can be ignored depends on whether core goods inflation can be contained. He also highlighted that slow progress on tariffs is affecting inflation forecasts.

3. Economy and Employment: Believes the U.S. economy remains resilient amid challenges and is confident in productivity improvements (denies direct relation to AI). Also noted downside risks in the labor market.

4. Chairperson Succession: Powell stated that if a new chair is not confirmed by the end of his term in May, he will serve as interim chair and does not plan to leave the Board before the Justice Department’s related investigation concludes. (Source: Jintian Data)

Dot Plot: Path Unchanged, Consensus Slightly Increased

The published dot plot did not lower expectations for future rate cuts. The median forecast shows the federal funds rate at 3.4% in 2026 and 3.1% in 2027, indicating officials still expect one cut each year, consistent with December’s projections.

Source: Federal Reserve official website

A noteworthy positive signal is that, compared to the “historic divergence” shown in last December’s dot plot, the dispersion of the current forecasts has decreased. This suggests that after a period of observation and data validation, the Fed members’ views on the future rate path are converging, slightly reducing policy uncertainty. Although the median long-term rate forecast has been slightly raised, the large time span and numerous variables mean it has limited immediate impact on the current market.

Precious Metals Trends: Inflation Fears Outweigh “Safe” Signals

Although the rate decision itself did not add unexpected hawkish signals, the core logic driving the recent correction in precious metals—renewed inflation expectations—remains unchanged. Before the meeting, U.S. February PPI rose to 3.4% year-over-year, well above the expected 2.9%, hitting a nearly one-year high. This served as a warning that inflationary pressures were more persistent than anticipated even before the recent surge in energy prices. The ongoing geopolitical tensions and rising crude oil prices further intensified market concerns about sticky inflation.

From the charts, the main gold futures contract Au2604 gapped lower at open, then fell back toward the 60-day moving average, seen as a medium-term bull-bear dividing line, and again broke below the key retracement level of 0.382 Fibonacci. The technical structure shows signs of weakening. However, current prices are near the lower Bollinger band, and the decline has not been accompanied by significant volume increase, suggesting a possible slowdown in the short-term downtrend. Key support at the 60-day moving average should be monitored; if broken, further support may be found near the consolidation zone around early 2026.

Source: Tonghuashun Futures

Silver (Ag2606) performed even weaker, breaking below the 60-day moving average earlier and closing below it for four consecutive days. Today, it also gapped down sharply, with a larger decline than gold. The MACD indicator’s fast and slow lines have crossed below zero, and multiple indicators show weakening momentum. Short-term, silver futures are likely to remain volatile and weak, with initial support around 17,944 yuan (February 6 close).

Source: Tonghuashun Futures

Key to Future Gold and Silver Trends: Confirming the “Oil Price-Inflation” Transmission Chain

Future movements depend on closely monitoring three core inflation data points:

1. PPI: As a leading indicator, February’s rebound exceeded expectations. Watch whether high oil prices will push it further upward.

2. CPI/PCE: Observe whether rising energy costs are transmitted to end consumer prices, leading to a resurgence in core inflation.

Although the Fed did not signal unexpected hawkishness last night, inflation outlook uncertainties remain. Investors should strictly manage positions in precious metals to cope with potential volatility and patiently wait for clearer signals from inflation data.

Sources: Federal Reserve official website, Jintian Data, CME FedWatch, Tonghuashun, Guotai Junan Futures Research Institute

Deadline: March 19, 2026, 10:53 AM

Disclaimer:

The support and resistance levels are derived from technical analysis methods such as moving averages, Bollinger Bands, chart patterns, and Fibonacci retracements, for reference only. Investors should be aware that once support or resistance levels are broken, they may turn into the opposite.

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