Precious metals fell sharply on Wednesday as investors shifted focus back to inflation concerns, interest rates and the outlook for central bank policy. Spot gold dropped 2.4% to about $4,161.63 an ounce by 7:05 a.m. ET, while U.S. gold futures fell 2.2% to $4,194.90 an ounce. Silver also weakened, with related exchange-traded funds and mining stocks trading lower in premarket activity. The ProShares Ultra Silver ETF was down 2.8%, the iShares Silver Trust slipped 1.4%, First Majestic Silver fell 3.8% and Hecla Mining lost 3.1%.
Broader markets were also under pressure. European and Asian equities traded lower, U.S. stock futures pointed down before the opening bell, and bitcoin slipped 1.3% to around $61,049.25. The selloff came as traders weighed the impact of higher inflation risks, especially after escalating tensions in the Middle East pushed oil prices higher. Analysts said the rise in energy prices is reinforcing expectations that central banks will keep monetary policy tighter for longer, lifting real yields and making non-yielding assets such as gold and silver less attractive.
Market pricing suggests the Federal Reserve is widely expected to leave interest rates unchanged at next week’s policy meeting, with the CME FedWatch tool showing a 98.2% chance of no change. Traders also see a meaningful possibility of a rate hike later this year, with roughly a 40% chance priced in by the Fed’s October meeting. In Europe, the European Central Bank is also expected to raise rates by 25 basis points at its meeting on Thursday, according to market data.
Some strategists said the decline reflects more than just geopolitics. They pointed to broad risk reduction across markets, with investors unwinding leveraged positions after recent losses in other assets. Gold and silver also moved below their 200-day moving averages, a technical sign that can indicate a longer-term change in momentum. Last Friday’s hotter-than-expected U.S. jobs report added to the pressure by strengthening bets that the Fed will stay hawkish.
Still, not all analysts believe the metal rally has ended. While some warned gold could fall further in the near term, others argued the broader trend remains intact. Supporters of gold noted that the metal has been in a bull market since late 2022, helped by central bank buying and ETF inflows. They said the recent weakness may be driven by stretched positioning rather than a fundamental break in the trend. Longer-term support could come from reserve diversification, sustained central bank demand, renewed ETF inflows and a weaker U.S. dollar.
