Gold and silver exchange-traded funds (ETFs) fell sharply on August 31, with some silver ETFs losing more than 4% in morning trade. The sell-off followed hawkish remarks from US Federal Reserve Chair Kevin Warsh and a rise in bond yields, which reduced the appeal of non-yielding precious metals. Rising tensions between the US and Iran added to inflation concerns, further pressuring prices.
Fed comments strengthen rate-hike expectations
At the Federal Reserve’s annual Jackson Hole symposium last Friday, Kevin Warsh said the central bank may need to raise interest rates if inflation does not return to its 2% target. Markets are now pricing in a 60% probability of a rate hike at the Fed’s September meeting, according to the CME FedWatch tool. Higher interest rates and rising bond yields typically weigh on gold and silver because the metals do not pay interest.
Warsh acknowledged that the Fed “will have work to do” if policymakers do not gain confidence that inflation is heading down to 2%. His comments came closer than before to signalling that further rate increases might be necessary.
Bond yields climb, inflation remains elevated
The US 10-year bond yield rose to 4.74%, its fourth consecutive session of gains. The 30-year yield stood at 5.22%, extending a three-day rise. Meanwhile, the Personal Consumption Expenditure (PCE) price index increased 3.7% year-on-year in July, marking the 65th straight month above the Fed’s 2% target.
Rising bond yields and sticky inflation reduce the relative attractiveness of gold and silver, which offer no income stream. Investors have responded by taking profits and shifting capital toward yielding assets.
Geopolitical tensions add to uncertainty
US-Iran tensions escalated after US President Donald Trump posted an AI-generated video clip showing Iran’s Kharg Island oil hub being destroyed. The post came hours after the two countries traded attacks for the first time since July. Iran launched strikes on Monday after US forces hit Iranian rocket launchers on the Strait of Hormuz on Sunday.
The conflict has pushed energy prices higher and increased demand for the US dollar, both of which contribute to inflation fears and the possibility of further Fed tightening. That, in turn, has added downward pressure on precious metals.
Price moves across ETFs, futures and spot
Silver ETFs saw the steepest declines. SBI Silver ETF fell 4.05% to ₹226.55, and Nippon India Silver ETF (Silver BeES) dropped 4.06% to ₹221.07. Tata Silver ETF declined 3.98% to ₹22.44, while ICICI Prudential Silver ETF slipped 3.87% to ₹231.21.
Gold ETFs also fell. ICICI Prudential Gold ETF dropped 3.59% to ₹130.75, SBI Gold ETF declined 3.50% to ₹130.30 and Nippon India ETF Gold BeES lost 3.48% to ₹126.30. Tata Gold ETF was down 3.19% at ₹14.87.
In global markets, spot gold touched its lowest level in nearly two weeks at $4,439.31 per ounce, down 0.3%. US gold futures fell 0.9% to $4,489.50, and spot silver slipped 0.5% to $66.68. On the Multi Commodity Exchange (MCX), gold October futures fell almost 2% to ₹1,53,640 per 10 grams, while silver September contracts plunged nearly 2% to ₹2,32,501 per kilogram.
For the latest updates on bullion markets, see the live gold price.
Key takeaways
- Gold and silver ETFs fell up to 4% on August 31 after hawkish Fed remarks boosted rate-hike expectations.
- The US 10-year bond yield rose to 4.74%, reducing the appeal of non-yielding precious metals.
- US-Iran tensions pushed energy prices higher and fuelled inflation fears, adding to downward pressure on gold and silver.
- Spot gold hit a two-week low near $4,439 per ounce, while silver also declined.
Common questions
Why did gold and silver ETFs fall on August 31?
The declines were driven by hawkish comments from Federal Reserve Chair Kevin Warsh, which strengthened expectations of an interest-rate hike. Rising US bond yields and escalating US-Iran tensions also contributed, as higher energy prices stoked inflation concerns that could lead to tighter monetary policy.
What did Kevin Warsh say at Jackson Hole?
Warsh said the Federal Reserve may need to raise interest rates if inflation does not return to the 2% target. He stated that the Fed “will have work to do” if policymakers lack confidence that inflation is heading down to 2%, signalling a willingness to hike further if needed.
How did US-Iran tensions affect gold prices?
The conflict pushed up energy prices and increased demand for the US dollar, both of which raise the risk of an inflation flare-up. That could prompt the Fed to raise rates again, which is negative for gold and silver as non-yielding assets.
The sharp sell-off in gold and silver ETFs underscores the market’s sensitivity to monetary policy signals and geopolitical shocks. With rate-hike odds remaining elevated and Middle East tensions unresolved, precious metals may continue to face headwinds in the near term.