Gold and Silver Prices Fall Due to Fed Hawkishness
Gold and silver prices fell sharply again after the market readjusted expectations regarding the direction of the Federal Reserve's interest rate policy. Gold futures in New York fell 3.1% to US$4,543.90 per troy ounce, heading for a weekly decline of more than 4%. Meanwhile, silver fell further, down 9.7% to US$77.08 per ounce.
Pressure on precious metals arose as the surge in oil prices due to the war intensified inflation concerns in the United States. As inflation risks rising again, the market began to anticipate that the Fed could maintain high interest rates for longer, even opening the door to a more hawkish policy stance. This caused non-yielding assets like gold and silver to lose some of their appeal.
Market participants believe that expectations for the Fed's interest rate are continuing to rise after the latest batch of hawkish US economic data. Consequently, US government bond yields also rose. The two-year Treasury yield even rose to its highest level in months, putting additional pressure on non-interest-bearing precious metals.
In my opinion, the current weakening of gold and silver is largely driven by a combination of a strengthening US dollar, rising bond yields, and concerns about energy inflation. The dollar index (DXY) rose 0.4% to 99.23, making dollar-based commodities more expensive for foreign buyers.
As long as the market still sees the possibility of a tightening Fed stance and energy prices remain high, gold and silver may struggle to recover in the short term, although geopolitical risks could still prevent further declines.
Source: Newsmaker.id
