Gold and Silver Prices Plunge as Markets Reprice Interest Rates

The price of gold and silver plummeted in September, with gold dropping by 8.5% and silver falling by 13.5%. Despite strong economic data from the US, which showed GDP growth accelerating to 2.2% annualized, inflation on the PCE measure was revised down to 5.0%, curbing bond yields beneath yesterday's fresh multi-decade highs.

The price of gold and silver initially spiked when new US data was released, but they erased that move as the Dollar rallied and crude oil prices rose. The strong economic data and resilient labor market are forcing markets to reconsider the level at which rates could find an equilibrium, according to Mauro Valle, head of fixed income at Generali.

Markets can make their peace with a yield above 5% if it arrives slowly, but a fast repricing is a different animal, says Laura Cooper at Nuveen. The Federal Reserve's interest-rate expectations have fallen, and betting that the Fed will follow this month's rate hike with another increase in October has dropped below 35%.