Gold and silver fall to nine-week lows amid persistent yield and dollar strength

Outside Market Developments: Markets are in a risk-off mode today with bond yields and the dollar back on the bid, oil prices higher amid renewed Middle East tensions, and caution ahead of today's release of the September FOMC minutes. Stocks (especially growth/tech names) are pulling back from recent record highs.

Oil shipments through the Strait of Hormuz had nearly returned to pre-war levels in recent weeks, with crude exports reaching a seven-day average of about 13.5 million barrels per day – matching the pre-conflict baseline – and overall regional Middle East crude flows even exceeding pre-war averages on multiple days in late September. However, a recent surge in Iranian attacks on vessels in and around the strait has heightened shipping risks and insurance costs, preventing a full normalization of supply security and helping keep global oil prices elevated above $100 per barrel.

Today’s FOMC minutes from the September meeting are likely to reveal a broader internal debate, despite the unanimous 25 bps suggested, highlighting divergent views among officials on the need for further tightening versus a more patient approach. They are expected to underscore persistent inflation risks that supported the median projection for one additional hike in 2026, while also reflecting discussions of solid economic growth and balanced labor-market risks at the time. Evidence of some degree of reluctance among the dovish-tilted members could spark a rally in Fed funds futures.

Global bond yields have climbed sharply in recent sessions, with the U.S. 10-year note yield rising to around 5.33-5.35% and the 30-year bond yield hitting approximately 5.70-5.73%, both marking their highest levels since 2002. The sell-off has been broad-based, with U.K. 30-year gilt yields surging to a 28-year high near 6.03% and European yields, particularly in France and Italy, also advancing amid persistent inflation concerns and elevated oil prices. For heavily indebted countries, the sharp rise in global yields translates into soaring debt-servicing costs that threaten to strain already fragile budgets and amplify fiscal stress.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$47.03 (-1.13%)
5-Day Change: -$32.96 (-0.79%)
YTD Range: $3,945.52 - $5,595.02
52-Week Range: $3,887.03 - $5,595.02
Weighted Alpha: -3.20

Gold slid to nine-week lows, weighed by expectations that the Fed will tighten at least one more time this year, which is underpinning yields and the dollar. The bear camp seemed disinclined to press the technical advantage ahead of this afternoon's release of the FOMC minutes from the September meeting.

 

Minor chart support at $4,065.84 (5-Aug low) has contained the downside thus far, but tests of secondary supports at $4,043.54 (4-Aug low) and $4,022.62 (3-Aug low) must now be considered. As noted earlier in the week, I still believe the low for the year is in at $3,945.52 (30-Jun), but my confidence in that scenario has eroded somewhat with today's downside extension.

Former lows at $4,124.23/$4,125.55 now mark first resistance. Above that, today's overseas high at $4,169.88 protects the high for the week at $4,183.65. A breach of the latter would clear the way for renewed tests above $4,200, where the highs from late last week and the declining 20- and 100-day moving averages come into play.

Not surprisingly, the World Gold Council's Gold Return Attribution Model (GRAM) confirmed that "a rise in yields and a stronger US dollar were major contributors to September’s drop in [gold] prices." The WGC went on to note that while COMEX positioning contracted sharply, global gold ETFs "recorded US$10bn (67t) of inflows across regions. North America led the charge, followed by Europe and Asia."



I found this paragraph from the WGC report interesting as I've had some difficulty justifying how the current market conditions warrant multi-decade high yields in government bonds, unless concerns about massive and growing debt loads are quietly (for now) ramping:

"Rising government bond yields have generated intense debate this year. Explanations range from stronger growth and a return to historical norms, to fiscal risk and a weakening safe-haven premium. Europe’s surge in gold ETF inflows, led by the UK and exceeding US inflows over the past three months, suggests some investors may see the rise in yields as a warning rather than a healthy normalisation." 

China’s central bank continued gold purchases for a 23rd consecutive month in September, providing some structural demand. Longer-term forecasts from the LBMA conference in Sorrento, Italy still point to potential upside toward $5,000 over the next 12 months, while near-term sentiment is cautious with a downside bias until there's some clarity on the Fed's policy intentions. I'm not expecting to get that from the FOMC minutes today.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$1.292 (-2.11%)
5-Day Change: -$0.139 (-0.23%)
YTD Range: $54.778 - $121.630
52-Week Range: $45.563 - $121.630
Weighted Alpha: +5.50

Silver fell to a nine-week low of $59 in early U.S. trading, amid persistently high yields and renewed dollar strength. The trade is eagerly anticipating the September FOMC minutes, although I'm doubtful any new insights will be revealed.



Additional losses with potential to the $58.272 Fibonacci level must now be considered. Below that, the late-July lows at $56.681/583 would be in play.

A close back above $60 today would ease pressure on the downside somewhat, but the 20-, 50-, and 100-day moving averages must be regained to allow for a retest of recent highs at $62.021/079. Further out, the $70 level is the key to unlocking more significant retracement of this year's losses toward $80.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

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