Gold News

Gold and Silver Prices Whacked by 'Higher for Longer' Bond Market Rout

The GOLD PRICE rallied from the past week's 5% plunge in London trade today, bouncing $10 from $1815 per Troy ounce as silver also rose from a new 7-month low but held nearly 9% lower from last Tuesday as longer-term interest rates continued to hit fresh multi-year highs in the bond market following more 'hawkish' comments from US Fed policymakers.
Watch or listen to our Gold Market Reports on YouTube.
Global stock markets fell for the 12th time in 13 sessions, pulling the MSCI World Index back towards last week's 4-month low, almost 7% beneath late-July's 15-month peak.
Crude oil also extended its drop, falling for the 4th session running and dropping near 4-week lows at $90 per barrel of Brent.
"The rout in Treasuries, which is costing gold and silver, [has] the market continues to digest the 'higher for longer' messaging [from] the Fed," says a trading note from Swiss bullion refining and finance group MKS Pamp.
"Silver's fall on Friday was precipitous," says Rhona O'Connell at brokerage StoneX, adding that "the long Chinese holiday...was a partial trigger but the main influence [is the] surge in bond yields.
"Support has developed at the start of this week, but potential professional buyers [have] stood well back."
Chart of gold and silver priced in US Dollars, last 12 months. Source: BullionVault
"I see a continued risk that high energy prices could reverse some of the progress we have seen on inflation in recent months," said Fed governor Michelle Bowman, a voting member of the US central bank's policy team, adding that she expects " further rate increases will likely be needed".
That plural means she's "urg[ing] multiple rate hikes" according to Bloomberg News' headline writers, something predicted by neither the Fed's own forecasts nor market pricing in Fed Funds futures.
"Predictability is just gone. It's very hard to operate a business without predictability," said a small business owner to Fed chairman Jerome Powell at a roundtable meeting with members of the public in York, Pennsylvania on Monday.
"We'll get inflation down," Powell replied.
But "lower interest rates" were the No.1 ask for another small business owner at the meeting. 
"We are at, or near, the peak level," said New York Fed president John Williams in a speech on Friday, "[but] I expect we will need to maintain a restrictive stance of monetary policy for some time."
"Progress is being made," said non-voting committee member Loretta Mester of the Cleveland Fed, "but the level of inflation remains too high...We are not there yet."
"I think there is case to be made that the US economy is a lot more resilient than we thought," said her fellow alternate member Thomas Barkin of the Richmond Fed in a Bloomberg interview aired yesterday, suggesting "a somewhat higher-for-longer rate path."
With China still out for the National Day holidays, gold priced in Japanese Yen today bounced off a new 10-week low beneath ¥8,750 per gram – over 5% below last month's new all-time Yen gold highs – as Japan today raised the coupon it pays to buyers of new 10-year government debt to 0.8% per annum, the highest in a decade, even as Tokyo's central bank prepares to buy bonds tomorrow to try pushing down borrowing costs down from that level.
Ten-year borrowing costs in Germany – which "need[s] to normalise fiscal policy" by cutting spending versus tax revenues, says Bundesbank central bank boss Thomas Nagel – today marked the country's Reunification holiday by rising towards last week's decade-high near 3.0% per annum.
The UK's 10-year Gilt yield meanwhile pushed above 4.5% – the highest since 2008 when first reached amid the Conservative Government's 'mini-budget' meltdown this time last year.
Euro gold today rallied €10 from a 6-week low of €1734, while the UK gold price in Pounds per ounce held above £1500, down more than 4% from this time last week.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn



Market Fundamentals