Precious Metals Retreat Amid Persisting Inflation and Energy Price Surge
On Thursday’s US market close, spot gold fell 1.90% to $1,317.10 per ounce, while spot silver plummeted 5.46% to $63.50 per ounce. August’s Producer Price Index (PPI) showed a 0.4% month-on-month increase and a 5.4% year-on-year rise, fueled primarily by higher energy and diesel costs. This sustained inflation pressure dampened gold and silver’s safe-haven demand despite geopolitical tensions involving Iran and the US. The strength in oil prices and climbing US Treasury yields offset some risk-off sentiment that might have otherwise supported precious metals.
US and European Equities Slide as Oil Prices Spike
Major North American stock indices dropped between 0.6% and 1%. The S&P 500 closed down 44.66 points at 3,591.70, the Dow Jones Industrial Average fell 316.56 points to 32,064.10, and the Nasdaq Composite lost 171.62 points, ending at 13,081.72. European markets also faced pressure, with the STOXX Europe 600 declining 0.69%, the FTSE 100 down 0.57%, and Germany’s DAX retreating 0.84%. Benchmark crude prices surged sharply amid heightened supply concerns; West Texas Intermediate (WTI) crude rose 6.7% to $102.48 a barrel, and Brent crude gained 6.3% to $107.63, hitting highs not seen since May. Attacks on oil tankers near the Strait of Hormuz have aggravated supply risks, creating divergent market responses between energy and other assets.
US Treasury Yields Near Five Percent, Signaling Strong Fed Tightening Expectations
Yields on the 10-year US Treasury climbed to 4.943%, the highest level since October 2023. Federal funds futures now price a 71% probability of the Federal Reserve raising interest rates by another 25 basis points at next week’s policy meeting. Market participants are closely awaiting Friday’s Consumer Price Index (CPI) release, viewed as a key gauge ahead of Fed decisions. Elevated yields increase the opportunity cost of holding non-yielding assets like gold, reducing its appeal as an investment.
Technical Signals Point to Further Downside for Silver
Spot gold has broken below the critical 200-day moving average at $1,341.10, testing recent technical support near $1,315.78. Unless CPI data indicates a moderation in inflation, there is downside risk. Silver has fallen through multiple technical support levels, slipping below the $67.25–$68.17 retracement range and key supports at $65.60 and $63.31. The metal may test levels near $62.57 if selling pressure continues.
Geopolitical Tensions Keep Oil Volatility Elevated, Impacting Inflation and Yields
Geopolitical risks around the Strait of Hormuz remain a central factor in oil price dynamics and broader market sentiment. Recent attacks by Houthi forces on oil shipments in the Red Sea, including near Yemen’s Mocha port, have increased uncertainty over a critical maritime route. Oil prices holding above $100 per barrel have heightened inflation expectations and pushed US Treasury yields higher. This environment reinforces the market’s anticipation of ongoing Federal Reserve rate hikes and underscores the complex interplay between energy prices and monetary policy.