Gold, silver and bitcoin fall as interest rates grab investors’ attention

Precious metals were also firmly in negative territory among assets on Wednesday, as concerns about inflation and the Federal Reserve’s interest rate path weighed on investor sentiment.

by 7:05 a.m. Eastern Time. spot gold It fell 2.4% to trade around $4,161.63 an ounce. us gold futures It also fell 2.2% to settle at $4,194.90 per ounce.

Stocks and funds tied to gold and silver also fell in pre-market trading on Wednesday. The ProShares Ultra Silver ETF fell 2.8% and the iShares Silver Trust ETF fell 1.4%. first majestic silver Although it decreased by 3.8%, hecla mine It was down 3.1%.

European and Asian stocks were broadly lower in their respective sessions, while U.S. stock futures fell ahead of regular trading on Wall Street. Bitcoin also came under further pressure, falling about 1.3% to trade at $61,049.25.

Ewa Mansey, commodity strategist at ING, told CNBC that gold and silver are under pressure as market focus shifts back to interest rates and inflation rather than pure safe-haven demand.

“The tense situation in the Middle East is causing oil prices to rise and inflation risks to rise. As a result, there is a growing expectation that central bank tightening will be prolonged,” he said. “This has pushed real yields higher, creating a clear headwind for non-yielding assets such as gold and silver.”

According to CME’s FedWatch tool, money markets are currently pricing in a 98.2% chance that the Fed will leave key interest rates unchanged at next week’s FOMC meeting. Traders currently see a roughly 40% chance of a rate hike before the Fed’s October meeting.

The ECB is overwhelmingly expected to raise interest rates by 25 basis points at its own monetary policy meeting on Thursday, according to LSEG data.

Before the outbreak of the US-Iran war, which recently exceeded 100 days, traders expected the Fed to take a more dovish stance later this year.

“Despite the geopolitical tensions, the key drivers at the moment are macro, with rising yields and a more hawkish interest rate outlook outweighing the safe-haven bid,” Manthey said. “In the short term, metals remain vulnerable unless we see lower yields or softer U.S. inflation data.”

Last Friday, a variety of assets sold off as better-than-expected U.S. employment data reinforced expectations that the Federal Reserve would raise interest rates.

Raj Abrol, CEO of global risk management platform Galytix, told CNBC that gold and silver are being driven by “the same forces tightening credit conditions in other regions.”

“If real yields recover and the dollar strengthens at the same time, the cost of capital will rise over the next 12 months for dollar-financed EMDE borrowers, leveraged credit, and anyone facing refinancing barriers,” he said. “Metal desks are exactly where it shows up the quickest.”

Rajiv Sawhney, head of international portfolio management at Wave Digital Assets, told CNBC in an email Wednesday that various assets have shown stronger correlations with stocks over the past two days.

“This is a classic case of broad market deleveraging, with over-positioning and leverage forcing the sale of good positions and assets to fund poor positions, essentially a market flush-out,” he said.

“On a technical basis, both gold and silver have removed their 200-day moving averages, which have historically been good indicators of changes in trend/momentum over longer periods of time.”

But Alex King, investment strategy analyst at Wellington Management, cautioned against treating the commodity as a single geopolitical or inflation trade, urging investors to “instead look internally at the clear drivers of individual exposures, such as gold, and the role they play in their portfolios.”

“Gold has been in a largely bull market since late 2022, initially supported by central bank buying and then strengthened by ETF inflows, but then tighter positioning and more corrections,” he said.

“Gold’s recent decline may reflect cyclical excesses rather than a break in trend, and future return expectations may be lower, but longer-term support from reserve diversification, central bank demand, ETF inflows, and a potential weaker USD appears more sustainable.”

Analysts at Citi warned in a note this week that gold prices could fall another 20% by the fall.

But King said gold could see upside if certain changes occur.

“The dynamics of central bank reallocation of reserves are having an impact,” he said. “Given the relatively small market size of gold compared to U.S. Treasuries, even small movements by major bondholders like China and Japan could have a significant impact on gold. It is also possible that the recent strength in the US dollar weakens again, weighing on the dollar’s position as a reserve asset and strengthening gold’s appeal as an alternative store of value.”