Hotter-than-expected US wholesale inflation data, a still-solid labour market, combined with the European Central Bank (ECB)’s 25-bASIs-point rate hike, further reinforced the global "higher rates for longer" narrative. Spot gold and silver both tumbled sharply in early Thursday trading. During US hours, spot gold kept falling and hit a daily low of $4323.86 per ounce, down nearly $80 on the day; spot silver traded at $63.914 per ounce, with losses exceeding 5%.

(Source: FX168)

Inflation Data Boosts Rate Hike Bets

The latest capital flows have clearly turned negative for precious metals. US August Producer Price Index (PPI) rose 0.4% month-on-month and 5.4% year-on-year; core PPI excluding food and energy climbed 0.3% month-on-month and 4.7% year-on-year. The inflation uptick was mainly driven by commodity prices, with energy costs up 4.2% and diesel prices surging 24.1%.

Meanwhile, US initial jobless claims for the prior week fell to 206,000, below the revised reading of 207,000; continuing jobless claims dropped to 1.774 million, showing the labour market remains resilient. This means safe-haven gold buying that investors hoped for amid growth concerns failed to materialise.

In Europe, the ECB raised its benchmark interest rate by 25 bASIs points to 2.50%, noting that energy price pressures stemming from the Iran war are stoking inflation. Markets are still pricing in roughly a 60% chance of a Fed rate hike at the September 15–16 meeting. As a key anchor for rate pricing, the US 10-year Treasury yield hovers near 4.8%. Friday’s US CPI release will be the final critical inflation input ahead of the Fed decision.

Gold and Silver Driven by Rates and US Dollar

Gold and silver are currently trading on interest rates and the US dollar rather than acting as pure safe-haven assets. Gold has broken the $4396–$4422 zone and tested the 200-day moving average reference near $4341. Silver fell below its 200-day MA at $65.718 and the 50-day MA at $65.471.

This selloff shows oil-fuelled inflation is weighing on precious metals faster via the yield channel instead of supporting them through geopolitical safe-haven demand. For bulls to reverse the trend, Friday’s CPI must cool substantially. Otherwise, gold and silver are more likely to keep testing lower levels rather than staging a rebound.

Strait of Hormuz Risks and Oil Prices Remain Wildcards

The Strait of Hormuz remains the core geopolitical channel linking oil prices, inflation expectations and defensive demand. Following the latest US-Iran tensions, Brent crude stays close to $100 per barrel, and hostilities continue to disrupt tanker traffic through this waterway.

The ECB rate hike also highlights the global spillover of this shock: Europe is bearing higher energy costs, while the US sees this pass-through in producer prices. The situation remains contradictory for gold: Hormuz risks underpin safe-haven demand, yet higher oil prices lift inflation expectations, keep yields elevated and reinforce the case for another Fed rate hike.

Global Markets Under Broad Pressure

Global markets traded weaker overall after the PPI release. US stock futures faced pressure, with US equities having declined for three consecutive sessions; European markets retreated on the ECB rate hike and higher energy prices; ASIan markets showed mixed performance. Bond markets remain the core anchor for cross-asset trading, and traders are watching whether Friday’s CPI will validate the inflation signals sent by PPI.

On external markets, Nymex WTI crude strengthened and hovered near $90 per barrel; Brent crude stood close to $100 per barrel; the benchmark US 10-year Treasury yield stayed around 4.8%; the US Dollar Index advanced after the data print. The Kitco Global Index illustrates how much of today’s gold volatility stems from dollar movements versus gold-specific price action.

Technical Outlook: Key Levels for Gold and Silver

Technically, the next bullish target for spot gold is to reclaim resistance at $4396.30. A sustained breakout would open the door to $4500. The immediate bearish objective is a break below $4341.10, followed by $4290 and $4263. Short-term primary resistance sits at $4396.30 and then $4500; primary support is $4341.10, followed by $4290.

For spot silver, bulls need to retake $65.718. A hold above this level would target $67.25 and $68.17. The next bearish target is a break under $63.31, with further downside at $62.57 and $62.56. Short-term primary resistance for silver is $65.718, then $67.25; the next support level is $63.31, followed by $62.57.