Gold and silver came under strong selling pressure as investors began to reprice the risk of US interest rates remaining high for longer. The direct trigger for the deterioration in sentiment was inflation data showing a clear acceleration of price pressure in the American economy. Rising inflation, driven by the effects of the war and higher energy prices, reduced expectations for monetary policy easing by the Federal Reserve, hitting non-interest-bearing assets particularly hard.
The price of gold fell by around 1.9 percent, dropping below USD 4,565 per ounce. Since the previous Friday, the metal has lost around 3 percent, and since the beginning of the war its price has already fallen by more than 13 percent. Although gold usually gains during periods of heightened geopolitical uncertainty, this time its safe-haven role was weakened by rising US bond yields and a stronger dollar.
Silver recorded an even deeper sell-off, with its price falling by around 6 percent to approximately USD 78 per ounce. This marked a sharp reversal after an earlier dynamic rally, during which the metal’s price briefly approached USD 90 per ounce. Such a strong increase made the market more vulnerable to profit-taking, especially amid worsening sentiment towards precious metals and growing aversion to more volatile assets.
Pressure on gold and silver was reinforced by developments in the debt market. The yield on two-year US Treasury bonds rose to its highest level in 14 months, signalling that investors are increasingly assuming the Fed will maintain restrictive monetary policy. This scenario was also supported by macroeconomic data. US producer inflation accelerated in April to its highest level since 2022, while consumer inflation recorded its strongest increase since 2023. As a result, the market began to scale back expectations for rapid interest rate cuts.
The situation on the energy market also remained an important source of tension. The Strait of Hormuz is effectively closed, sustaining the energy crisis and increasing concerns about further rises in commodity costs. June WTI crude oil futures are approaching USD 105 per barrel, while more expensive energy strengthens the risk of inflation becoming entrenched.
For precious metals, this creates a difficult environment. On the one hand, geopolitical tension remains elevated. On the other, expectations are growing that central banks will be forced to keep interest rates high for longer.
An additional factor weighing on the gold market was India’s decision to tighten gold import rules as it sought to defend the rupee after an earlier increase in import duties. This worsened demand sentiment in one of the world’s largest gold markets and added pressure to prices.
The latest declines show that precious metals are losing support in an environment of rising yields, a strong dollar and persistent inflation. Gold has failed to fully benefit from its safe-haven status because the market is currently placing greater weight on the prospect of high interest rates lasting for longer. Silver has come under even stronger pressure as investors took profits after the earlier rally.
As a result, the entire precious metals segment remains sensitive to further inflation data, movements in the bond market and developments in the energy market.
