Gold and silver, the two precious metals, are under big pressure, after inflation turned hot and bond yields started to climb. Gold has decreased by 19% and silver by 38% from their January highs, indicating a rapid loss of bullish momentum. In January, gold made an all-time high of $5,602 with silver creating a record high of $121.
Since then, both have been facing strong headwinds and have lost momentum. Both gold and silver have lost over 5% in the last 30 days. On Monday, May 18, the price of silver dropped below $75 per ounce, marking the third consecutive session of declines.
Iran’s ongoing war and a 17% rise in oil prices over the past month indicate that inflationary pressures are likely to persist. Both US CPI and PPI data for April showed inflation making a comeback. Overall, the energy price shock from the Middle East is impacting overall inflation trends.
As a result, the possibility of Federal Reserve rate cuts in 2026 is being ruled out. On the contrary, the market anticipates a rate hike in the near future to control potential inflation spikes. The yield on the US 10-year Treasury note has climbed to nearly 4.63% on Monday, reaching its highest level since January 2025. The yield on 30-year bonds has surpassed 5%, reaching its highest level in years, which indicates a notable tightening in financial conditions.
Meanwhile, on the back of rising oil prices, the US Dollar index has strengthened and is looking to go beyond 100 again. Both the stronger US dollar and increasing Treasury yields are putting pressure on silver and gold prices.
“The selloff continued as markets further repriced the Fed outlook amid persistent inflation risks tied to the ongoing Hormuz disruption. Rising Treasury yields and a stronger dollar weighed heavily on non-yielding assets after several Fed officials stressed that containing inflation remained the central priority. Markets are now pricing nearly a 50% probability of a 25-basis-point Fed rate hike by December, up sharply from just 13.6% a week ago,” reports the Kotak Neo – Commodity Research commentary.
Reportedly, UBS strategists have reduced their full-year silver investment demand forecast to 300 million ounces, down from over 400 million ounces, due to decreased industrial demand and increased mine supply.
The bank also projected that the global silver market deficit will significantly narrow to approximately 60–70 million ounces, down from an earlier estimate of about 300 million ounces.
On gold, analysts caution that it may experience further downside pressure if real yields rise. A breach below key support levels could lead to a retest of its broader trading range’s lower end, with some traders considering $4,000 per ounce as a possible support level.
Unless there is a meaningful shift in the interest rate expectations, the two precious metals may continue to face headwinds.
The focus, from here on, will be on the upcoming FOMC meeting minutes, flash US PMI data, and University of Michigan inflation expectations data, particularly as Kevin Warsh begins his tenure as the new Fed Chair, for further signals on the direction of monetary policy and the broader economic outlook.
Disclaimer: This article is for informational purposes only and does not constitute investment or financial advice. Gold and silver prices are subject to significant market volatility and may fluctuate based on macroeconomic conditions, geopolitical developments, and monetary policy changes. Please consult a qualified financial advisor before making any investment decisions.
