Gold And Silver Prices Tumble As Rising Bond Yields Put Precious Metals Under Pressure
Gold and silver prices fell sharply Monday as rising government bond yields added pressure to precious metals, sending gold futures down almost 4% and silver futures more than 5% lower during morning trading.
December gold futures traded around $4,115 an ounce Monday morning, down roughly 4%, while December silver futures fell to around $60.23 an ounce, a decline of more than 5%.
The declines marked another sharp reversal for metals that had posted strong gains earlier this year. Gold ended August at $4,481.50 an ounce, up 9.1% for the month, while silver finished August at $66.99, a monthly increase of 15.9%, according to CME Group.
Gold had already been losing ground in the days leading up to Monday’s sell-off. December futures fell more than 1% on Sept. 23 as the dollar strengthened and investors responded to the Federal Reserve’s latest interest-rate increase and subsequent comments from policymakers.
Higher bond yields have added another source of pressure. Gold and silver do not pay interest, meaning rising yields can increase the relative attraction of interest-bearing assets such as government bonds.
The broader shift in rates follows the Federal Reserve’s Sept. 16 decision to raise the federal funds target range by a quarter percentage point to 3.75% to 4%. The Federal Open Market Committee approved the move unanimously.
The Fed said economic activity continued to expand at a solid pace, domestic spending remained resilient and inflation was still elevated. The central bank said the rate increase was intended to support a return of inflation to its 2% goal.
Recent inflation data have reinforced that backdrop. The Bureau of Labor Statistics said the Consumer Price Index rose 0.4% in August after increasing 0.1% in July. Consumer prices were 3.4% higher than a year earlier.
Gasoline prices rose 3.9% during August and accounted for more than one-third of the monthly increase in the headline CPI, while the index excluding food and energy increased 0.3% during the month and 2.4% from a year earlier.
The latest retreat follows a period of unusually strong activity in precious metals markets. Average daily trading volume across the global gold market rose 21% in August to about $430 billion, while exchange-traded activity climbed 33%, according to the World Gold Council. COMEX gold derivatives trading increased 28% during the month.
Gold also entered September after one of its strongest monthly performances in decades. The World Gold Council said gold rose 13% during August on its broader price measure, marking its third-strongest monthly return in 25 years. ETF and futures flows, options activity and a weaker U.S. dollar all contributed to the move.
Official-sector demand has provided another major source of buying this year. Central banks and other official institutions bought a net 289 metric tons of gold during the second quarter, according to the World Gold Council’s Q2 Gold Demand Trends report. That was up from a revised 57 tons in the first quarter and represented a record amount for a second quarter.
