Gold and silver sell off on inflation and rate hike fears
Gold lost over 3% and silver dropped 6% as rising oil prices fueled new inflation concerns and increased expectations of a Federal Reserve rate hike. Hedge funds are liquidating gold positions to cover losses in other assets, with silver hit harder due to its industrial exposure.
Gold and silver experienced significant sell-offs on Friday, with gold losing over 3% and trading below $3,900 at one point, while silver dropped 6% to $49. The decline was driven by a combination of rising oil prices fueling new inflation concerns, increased expectations of a Federal Reserve rate hike in December now priced at 70%, and a tech stock sell-off on the Nasdaq. Hedge funds are liquidating gold positions, which they hold as a cash substitute, to cover losses in other assets. Silver was hit harder than gold due to its stronger correlation with industrial and tech demand, whereas central bank demand remains a supporting factor for gold.
In Germany, inflation fell to 2.8% in October from 3.3% in September, largely due to a fuel discount, while GDP grew 0.2% in Q3. French political unrest and a potential general strike are raising concerns about sovereign debt sustainability, with French 10-year bond yields potentially exceeding 5%.