why are metals declining tuesday?
Several analysts attributed Tuesday’s decline in prices to Iran war tensions and expectations the Federal Reserve may hike interest rates, which typically puts downward pressure on metals. Ole S. Hansen, head of commodity strategy at Saxo Bank, said in a post on X silver is experiencing a “renewed bout of weakness” as investors wait for more clarity on “inflation, energy prices, and the Federal Reserve’s policy path.” Analysts at Germany’s Commerzbank said as long as “expectations of interest rate hikes prevail,” which rose after a strong jobs report last week, gold prices are likely to stay down. Ryan McKay, senior commodity strategist at TD Securities, also cited inflation fears, strong jobs data and a heightened probability of interest rates increasing as reasons for Tuesday’s decline, Bloomberg reported. The decline in metals prices also follow strikes exchanged between Israel and Iran, as well as President Donald Trump declaring the United States “must” respond to Iran allegedly shooting down a U.S. Apache helicopter near the Strait of Hormuz.
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what to watch for
Analysts have indicated inflation data for May, scheduled to release on Wednesday, could also impact metals prices. “Should the U.S. inflation data for May also surprise on the upside on Wednesday, the gold price is likely to fall further,” Commerzbank analysts said Tuesday.
tangent
Metals prices also dipped late last week, with silver falling more than 6% and gold declining more than 2% on Friday after the Bureau of Labor Statistics reported jobs data for May. The report was stronger than expected, saying the U.S. added 172,000 nonfarm jobs in May while the unemployment rate remained at 4.3%. Bart Melek, global head of commodity strategy at TD Securities, said the jobs report makes it “quite unlikely that the Fed is in any mood whatsoever to lower rates,” noting the “implication for gold here is that the cost of carry is getting quite high.”
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key background
Gold and silver are still up significantly year-over-year, but they have come down from the historic levels reached in late January, when silver peaked above $120 and gold hit a high around $5,600. Their prices were lifted by factors including interest rate cuts, Trump’s tariffs, international tensions and increasing demand for silver by the technology industry. Prices crashed in late January after Trump named Kevin Warsh, considered less likely than other presumed candidates to slash interest rates, as his pick to lead the Federal Reserve. Metals prices have generally declined throughout the Iran war as oil prices have risen.
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further reading
Gold And Silver Hit Lowest Prices In Months After Strong Jobs Report (Forbes)