Gold and silver prices experienced significant declines on Wednesday amid a surge in US Treasury yields and a stronger US Dollar, as investors grew increasingly confident that the Federal Reserve (Fed) would continue its tightening cycle. Gold (XAU/USD) dropped by over 1.5% during the North American session, trading at $4,285 after reaching a high of $4,369, while silver (XAG/USD) tumbled more than 3.67% to $64.59, down from a high of $67.52 [1][2][3].
The sell-off in precious metals was driven by hawkish remarks from several Fed officials following last week's 25 basis point rate hike. Officials including Neel Kashkari, Alberto Musalem, Austan Goolsbee, Susan Collins, Thomas Barkin, and Michael Barr emphasized that inflation remains above the Fed’s 2% target and further rate hikes are likely needed [1][4]. The probability of a Fed rate hike at the October meeting jumped to 66% according to Prime Terminal, and to 73% according to the CME FedWatch Tool, up from 52% and 53% respectively before the latest data releases [1][4].
Stronger-than-expected US economic data further fueled expectations of continued Fed tightening. The preliminary S&P Global US Manufacturing PMI for September came in at 57.0, well above the forecast of 53.5 and the previous month's 53.9, while the Services PMI rose to 58.7 from 56.5, also beating expectations [1][4]. The US Dollar Index (DXY) climbed 0.7% to 101.22, reaching its highest level since late July, and US 10-year Treasury yields soared by 15 basis points to 5.12%–5.13%, their highest levels since 2007 [1][3][4].
The sharp rise in yields and the US Dollar weighed heavily on gold and silver, both of which are yieldless assets and tend to underperform in a rising rate environment [1][2][3]. Technical indicators for silver suggest further downside risk, with the Relative Strength Index (RSI) showing bearish momentum and key support levels at $64.00, $63.45, and $62.30 [2].
Elsewhere, oil prices remained volatile, with West Texas Intermediate (WTI) briefly rallying over 1.5% to $91.42 per barrel before edging lower on news of a potential US diesel export ban [1][3]. Geopolitical developments, including US-Iran diplomatic efforts and ongoing Middle East tensions, continued to influence market sentiment, but the dominant theme remained the Fed’s hawkish stance and its impact on global markets [1][4].
CONCLUSION
The combination of hawkish Fed commentary, robust US economic data, and surging Treasury yields has triggered sharp declines in gold and silver prices while boosting the US Dollar. With market expectations for further Fed rate hikes rising, precious metals may remain under pressure in the near term. Investors are closely watching upcoming Fed communications and economic releases for further direction.