Precious Metals Plunge on Rate Hike Bets and Rising Yields
Gold and silver prices fell sharply on Monday, August 31, as investors anticipated tighter US monetary policy. Gold declined by 0.91% to $4,488.60 an ounce, while silver dropped 0.83% to $66.44. The sell-off in precious metals continued from Friday's steep decline of 3.2%, driven by a jump in US Treasury yields.
The pressure on bullion is attributed to higher crude oil prices and rising bond yields. Brent futures climbed 1.4% to $89.38 a barrel, while US crude rose 1.3% to $84.50. This has fueled inflation concerns, making the Federal Reserve less likely to cut interest rates or more inclined to keep them higher for longer.
The increased probability of a September US rate hike has risen to around 57%, according to Reuters. Higher Treasury yields also make gold and silver less attractive, as these metals do not generate interest income. A stronger US dollar can add to the pressure by making dollar-priced precious metals more expensive for overseas buyers.
The sell-off in precious-metal ETFs was significantly sharper than the broader equity-market decline. The Sensex declined 423 points, or 0.55%, while the Nifty 50 had dropped 159 points, or 0.66%.