Gold (XAU/USD) and Silver (XAG/USD) extended their declines on Tuesday, with gold falling to fresh two-week lows around $4,375–$4,378, marking a nearly 7% drop from last week’s peak near $4,700, and silver dropping below $65 to $64.85, down 2.54% on the day [1][4][6]. The selloff in precious metals was driven by a sharp repricing of Federal Reserve (Fed) rate hike expectations following hawkish comments from Fed Chair Kevin Warsh at the Jackson Hole Symposium on Friday. Warsh emphasized the Fed's commitment to bringing inflation down to its 2% target, stating, 'We must be convinced that underlying inflation is moving toward our target clearly and at a sufficient pace. Otherwise, we still have work to do,' signaling openness to further rate hikes unless inflation shows convincing improvement [2][4][6].
Market-implied probabilities for a 25 basis point Fed hike at the September 15–16 meeting surged to 65–67%, up from around 40% a week ago, with futures pricing in 60 basis points of tightening over the next twelve months [1][3][4][6][7]. The US Dollar Index (DXY) rose 0.2% to near 99.60, close to a two-week high, and the 10-year US Treasury yield climbed to around 4.80%, its highest since January 2025 [2][4][7]. The stronger dollar and higher yields increased the opportunity cost of holding non-yielding assets like gold and silver, pressuring their prices further [1][4][6].
The hawkish Fed repricing also weighed on major currencies, with EUR/USD down 0.2% to 1.1593 and NZD/USD falling 0.35% below 0.5900, as the US Dollar outperformed across the board [2][7]. The USD was the strongest against the New Zealand Dollar, gaining 0.38% on the day [7]. Technical analysis for gold points to immediate support at $4,310–$4,330, with further downside toward $4,225 if selling persists. Resistance is now seen at $4,450 and $4,530 [1][4]. For silver, the break below $65.50 signals further vulnerability if Fed tightening expectations remain elevated [6].
Geopolitical tensions in the Middle East, including US-Iran strikes and a tanker incident in the Strait of Hormuz, as well as rising oil prices, added to inflation concerns but failed to support gold and silver, as markets focused on the interest rate channel [4][6]. Upcoming US economic data, including the ISM Manufacturing PMI, JOLTS Job Openings, and the August CPI (September 11), are seen as key tests that could influence Fed expectations and precious metals volatility [1][3][4][6][7]. Analysts at Brown Brothers Harriman and Rabobank highlight that the August CPI will be the 'decisive test' for whether the current hawkish pricing can be sustained [1][2][3][7].
In summary, the combination of hawkish Fed signals, rising US yields, and a resurgent dollar has created a challenging environment for gold and silver, with markets awaiting further US data to determine the next direction.
CONCLUSION
Gold and silver prices have come under significant pressure as markets sharply increase bets on a September Fed rate hike, driving the US Dollar and Treasury yields higher. Despite inflation and geopolitical risks, precious metals are struggling as the focus remains on tighter US monetary policy. The upcoming US economic data and the August CPI will be critical in shaping the Fed outlook and the trajectory for gold and silver.