Gold and Silver Prices Plummet Amid Rising Interest Rates
The recent surge in gold and silver prices has come to an abrupt end as the 10-year Treasury yield climbed back above 5.2%. This move marks a significant shift in market dynamics, with investors reassessing their bets on precious metals.
Gold futures settled at $4,135.40 on September 28, down 3.52% from the previous day's close, while spot silver fell to its weakest level in seven weeks at $61.53 an ounce. The gold-to-silver ratio widened to roughly 67, and miners like Newmont (NEM) took a hit with a decline of over four percent.
Max Baecker, president of American Hartford Gold, noted that if interest rates bring inflation under control, 'gold faces sustained pressure.' This sentiment is echoed by analysts who point out that gold has to beat the 1.8 percentage points of real return offered by a 5.2% Treasury to break even.
The selloff highlights the structural weakness of precious metals in comparison to bonds, which offer a regular interest payment. As the Federal Reserve continues to hike rates, investors are reevaluating their portfolios and considering more traditional safe-haven assets like Treasuries.