Gold Drops Below $4,400, Silver Slumps 3% as Rising Global Bond Yields Weigh on Precious Metals

TradingKey - As global government bond yields climbed across the board and the US Dollar Index continued to rise, the precious metals market faced a sharp sell-off. Spot silver (XAGUSD) fell more than 3% at one point to $64.46, hitting a low since August 19, while spot gold (XAUUSD) fell below $4,400 per ounce.

Source: TradingView

The pullback in gold and silver prices was mainly driven by rising energy prices pushing up inflation expectations, leading the market to adjust its outlook on major central banks' monetary policies.

Japan's 30-year government bond yield surpassed 4.18%, reaching an all-time high; the UK's 30-year yield rose to 5.88%, hitting its highest level since 1998; and Germany's 10-year yield reached 3.339%, the highest since 2011. The US 30-year Treasury yield also rose to 5.28%, up about 4 basis points on the day, nearing recent highs.

Rising bond yields mean higher opportunity costs for holding non-yielding assets such as gold and silver, while a stronger US dollar further suppresses the prices of dollar-denominated precious metals.

Meanwhile, hawkish policy signals from Federal Reserve Chair Warsh also weakened the prior upward momentum of precious metals. The market interpreted his speech as indicating that the Fed might raise policy rates in September and December, driving short-term interest rates and the US dollar higher together, which sharply contrasted with the market's pre-speech dovish expectations.