Heraeus precious metals analysts say there are significant divisions within the Federal Reserve, and it is unlikely that interest rate cuts will be used to stimulate gold demand this year; meanwhile, silver demand is benefiting from increased sales of electric vehicles in the EU and infrastructure construction, but investment enthusiasm for this grey metal continues to cool.



In their latest market update report, analysts pointed out that the Federal Reserve has given some clear signals regarding the path of interest rates.

"The benchmark interest rate remained unchanged; however, at the subsequent press conference, Powell outlined his views on the current monetary policy environment," they stated. "The most crucial point of the meeting was that the Fed did not overreact to the recent rise in the Consumer Price Index (CPI) triggered by the closure of the Strait of Hormuz. Powell stated that the Fed had anticipated that tariff adjustments and the closure of the Strait of Hormuz would lead to price increases, but believed that there was no need to address this situation by raising interest rates. The Fed's statement mentioned that the Personal Consumption Expenditures Price Index (PCE) rose 3.5% year-on-year, but 'most indicators of longer-term inflation expectations remain consistent with our 2% inflation target.' Powell also stated that he believes the neutral interest rate, which perfectly balances the Fed's dual mandate (price stability and full employment), is 'between 3% and 4%,' but implied that the current interest rate is slightly above this neutral level."

Analysts believe the Federal Reserve appears to think that "current economic activity is in good shape and there is no need for a rate cut; at the same time, the pace of price increases has not yet reached a level that warrants a rate hike." However, they also noted that three members of the Federal Open Market Committee (FOMC) "dissented from the wording of the statement, preferring a more hawkish tone," while another member voted for an immediate rate cut. They added, "Powell did not make any predictions or speculations about future interest rate movements and indicated that this might be his last FOMC meeting as Fed Chairman." This possibility has now increased significantly—the criminal investigation against Powell has been dropped, and Kevin Warsh has been confirmed by the Senate Banking Committee, paving the way for Warsh to formally assume the position of Fed Chairman before the June Fed meeting.

Turning to the supply side, Heraeus pointed out that Newmont, the world's largest gold miner, saw a decline in gold production in the first quarter of this year.

Newmont reported that its gold production in the first quarter of this year was approximately 1.3 million ounces, a decrease of about 13% year-over-year from the 1.5 million ounces projected for the first quarter of 2025, analysts said. "The decline in production was primarily due to operational disruptions at several mines and the divestiture of the Musselwhite and Cripple Creek & Victor mines last year. Despite the production decline, the company delivered extremely strong financial results thanks to higher gold prices—net profit rose to $3.3 billion and free cash flow reached a record high of $3.1 billion. Newmont also announced that it is on track to achieve its full-year production guidance of approximately 5.3 million ounces."

While gold ETF holdings have declined from their March highs, they have remained generally stable year-to-date. "US gold ETF holdings have fallen 2.1% from their February 27 peak to 98.8 million ounces," they wrote. "This figure is roughly in line with the level at the beginning of the year (98.9 million ounces). Year-to-date, gold ETF holdings have moved in close tandem with gold prices: there were three localized highs at the end of January, the end of February, and mid-April, and a low at the end of March, slightly lagging behind the year's lowest closing price for gold on March 26."

Regarding silver, Heraeus analysts stated that silver ETF holdings have been declining this year.

“Silver ETF holdings have fallen 8.2% from their peak on January 1 to 793.2 million ounces,” they wrote. “This downward trend began at the start of the year at 863.6 million ounces. Silver ETF holdings have been declining throughout the year, with only a few minor rebounds following increases in silver prices. However, this downward trend in ETF holdings appears to have leveled off since silver prices hit their lowest closing price of the year on March 26.”

Analysts also pointed out that the proportion of battery electric vehicles (BEVs) in new car registrations in the EU increased in the first quarter of this year. "BEVs will account for 19.4% (approximately 547,000 vehicles) of new car registrations in the EU in the first quarter of 2026, an increase of 4.2 percentage points compared to the first quarter of 2025," they stated. "Hybrid electric vehicles and plug-in hybrid electric vehicles accounted for 38.6% and 9.5% of registrations respectively, with hybrid electric vehicles becoming the most popular choice for new car registrations. The registration share of conventional internal combustion engine (ICE) vehicles decreased from 38.2% a year ago to 30.3%, highlighting the accelerated transition of the EU automotive market towards electrification."

Heraeus points out that the production of electric vehicles and their charging infrastructure requires "a significant amount of silver." "For example, electric vehicles use about 75% more silver than traditional internal combustion engine vehicles," analysts say. "Each electric vehicle can use one to two ounces of silver. In addition, charging infrastructure also consumes silver—a high-power DC charging station can use up to 50 ounces of silver, depending on its power rating and the number of charging ports, which is also a major support for industrial demand for silver."