Fed Hawkishness Weighs on Gold as Yields Surge
The US Federal Reserve has turned hawkish, with officials speaking out against low interest rates and inflation expectations rising. St. Louis Fed President James Bullard wants to see interest rates above 3.25%, while Fed Governor Cook expects additional inflation due to oil prices and AI-related economic activity.
Cook's comments suggest that the AI-related inflationary pressures could last for a prolonged period, which will be closely watched by market analysts. The bond market is under stress, with US benchmark yields at levels not seen since before the 2008 Financial Crisis.
The increased opportunity cost of holding bullion and decreased opportunity cost of investing in riskier assets are also working against gold and silver. Geopolitical risks usually provide a bid for gold, but the risks of inflation due to geopolitical risks, such as disruption of oil supplies from the US and Iran, work against a bid.