Gold, Silver Prices Plummet Amid Soaring US Inflation Expectations
Gold and silver prices plummeted on Thursday as data revealed a stronger-than-expected US producer inflation rate. The precious metals struggled to maintain their gains despite a strong year, with gold down 1.8% to $4,318.60 per ounce and silver falling 5.5% to $63.62 per ounce.
The sharp decline in prices came after the US producer price index increased by 0.4% month-on-month in August, exceeding market expectations of 5.3%. Annual producer inflation accelerated to 5.4%, driven by a significant rise in energy costs and signs of broader cost pass-through across the economy.
The increase in inflation expectations has strengthened predictions that the Federal Reserve will further tighten monetary policy at its September 16 meeting, with money markets pricing in a more than 70% probability of an interest rate hike. The European Central Bank also raised its three key interest rates by 25 basis points on Thursday, warning that inflation risks remain tilted to the upside.
Higher interest rates typically weigh on non-yielding precious metals, increasing their opportunity cost and putting downward pressure on prices. Oil prices rallied amid escalating tensions between the US and Iran in the Middle East, adding to concerns about elevated energy costs keeping inflation high.