Dollar Surge Pummels Gold, Silver in Hawkish Repricing Fallout
The dollar and US Treasury yields surged on Wednesday, sending shockwaves through the precious metals market. The hawkish Fed repricing implied another three-and-a-half 25 basis point hikes by mid-2027, pushing five-year Treasury yields above 5%. Gold and silver, which have been inversely correlated with the US dollar in recent sessions, plummeted as a result.
The Iranian President's comments that Iran would not surrender in its war with the United States sent Brent crude soaring, further pressuring long-end Treasury yields. The DXY index broke to fresh multi-month highs, and the correlation matrix showed an extremely tight relationship between gold, silver, and front-end US yields over the past week.
Despite the difficult macro environment, gold bulls are not yet giving up. The price continues to hold around levels seen throughout September, even as the dollar breaks to multi-month highs and yields hit historically high levels by modern standards. Technical indicators suggest that bears have the ascendancy, but the increase in downside pressure has stalled over the past half a day.