Gold, silver ETFs tumble up to 2% on Fed rate-hike bets

Gold and silver exchange-traded funds (ETFs) came under selling pressure on Monday, falling as much as 2 per cent, as strong US jobs data reinforced expectations of higher interest rates.

Investors were also awaiting key US inflation data due later this week for further clarity on the Federal Reserve’s policy path.

All gold ETFs traded in the red. ICICI Prudential Gold ETF fell 1.7 per cent, SBI Gold ETF declined 1.72 per cent and Nippon India ETF Gold BeES dropped 1.6 per cent. Tata Gold ETF was down 1.54 per cent.

A similar fall was seen in silver ETFs. Nippon India Silver ETF dropped 1.56 per cent, Tata Silver ETF declined 1.55 per cent and ICICI Prudential Silver ETF slipped 1.45 per cent.

Bullion fell as much as 1 per cent to below USD 4,400 an ounce. The metal had posted a similar drop in the previous session after data showed US nonfarm payrolls surged in August and the unemployment rate held steady, strengthening the case for the Federal Reserve to raise rates at its September 15-16 meeting.

The dollar gauge rose on Friday, making gold priced in the US currency more expensive for many buyers. Traders also increased bets on a rate hike, pricing in about a 60 per cent chance of an increase in September.

Higher borrowing costs typically weigh on bullion as the precious metal does not pay interest.

“Gold is being pulled into the heart of another macro storm,” said Hebe Chen, senior analyst at Vantage Markets in Melbourne.

“Surging oil prices, elevated Treasury yields and an increasingly stronger Fed-hike case after Friday’s robust jobs report are bringing back the familiar headwinds,” she added.

Adding to inflation concerns, Iran said it targeted three oil tankers in the Strait of Hormuz as well as a number of US-linked ships in retaliation for American attacks on vessels over the weekend.

The skirmishes raised fresh concerns over energy flows from the region. Oil prices climbed, with benchmark Brent crude rising above USD 97 a barrel.

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