Gold Down 8.5% in Sept, Silver -13.5% as Real Yields 'Re-Price Fast'

GOLD and SILVER PRICES spiked Wednesday in London, jumping 0.6% and 1.0% inside 5 minutes as new US data said the world's largest economy is accelerating but with slower inflation, curbing bond yields beneath yesterday's fresh multi-decade highs.

Priced in a falling US Dollar, silver touched $61.50 and gold hit $4218 per troy ounce after GDP growth for April-to-June was revised from 1.5% to 2.2% annualized but inflation on the PCE measure was cut 0.3 points to 5.0% in the Bureau of Economic Analysis' new estimates.

Both gold and silver then erased that move, however, as the Dollar rallied and crude oil prices rose, making a monthly drop of 8.5% and 13.5% respectively despite US interest-rate expectations falling as bond yields eased back.

Offering new buyers 5.24% per annum today, conventional 10-year Treasury yields still showed their steepest monthly rise since September 2023, adding 0.49 percentage points per annum to Washington's borrowing costs.

Inflation-protected US Treasury yields rose almost as much, jumping the fastest in 4 years and adding 0.44 percentage points to the real 10-year rate close to a record high.

Over the past 20 years, the price of gold has gone in the same direction month-to-month as the real yield on 10-year TIPS less than 30% of the time, and it has happened just once in 2026 so far.

That shows the strongest negative 9-month relationship between gold and real rates since the price of bullion set its Covid pandemic peak in summer 2020 as 10-year TIPS yields fell through minus 1.0% for the first time.

"Strong economic data, a resilient labour market, robust AI capex, easier fiscal policy and persistent energy inflation are forcing markets to reconsider the level at which rates could find an equilibrium," says Mauro Valle, head of fixed income at $1 trillion European asset managers Generali.

"Markets can make their peace with a yield above 5% if it arrives slowly," says global strategist Laura Cooper at $1.4trn investment group Nuveen, also speaking to the UK's TrustNet.

"A fast repricing is a different animal."

New data for August today put US inflation on the PCE measure at 3.4% per year, slightly faster than July but 0.3 percentage points below analysts' consensus forecasts.

Betting that the Federal Reserve will follow this month's interest-rate rise with another increase in October fell hard on the news, putting the odds below 35% having already dropped from 70% a week ago to an evens shot Tuesday following surprise weakness in US job openings figures.

Non-farm payrolls data for September is due out on Friday.

Market-priced forecasts for Fed rates this time next year now average 3.77% according to the CME derivatives exchange's FedWatch tool, down 0.1 from this week's earlier high but still almost 1 percentage point above the current rate.

New York's Comex gold futures for 12 months' time meantime traded around $4415 per ounce, rallying 1.4% from Monday's 8-week low.

US equities headed for a record high monthly-close on both the S&P500 and the tech-stock Nasdaq 100.