Gold and silver tumble as hot PPI and oil surge lift yields to multi-year highs

Precious metals took a beating on Thursday as a hotter-than-expected wholesale inflation report and surging oil prices drove Treasury yields to multi-year highs, strengthening the U.S. dollar and raising the cost of holding non-yielding assets like gold and silver.

Spot gold fell nearly 2% on the session, breaking below its 200-day exponential moving average and trading near $4,317 an ounce by late afternoon. Silver suffered far worse, dropping more than 5% and losing several key technical support levels before stabilizing around $63.50. Copper fell roughly 3%. The metals are now on track for a third consecutive weekly decline.stonex+2

Hot PPI and Oil Above $100 Shift the Calculus

The selloff accelerated after the Bureau of Labor Statistics reported that the Producer Price Index rose 0.4% in August on a monthly basis and 5.4% year-over-year, with energy and diesel costs driving much of the increase. The 10-year Treasury yield jumped to around 4.94%, its highest settlement since October 2023, while the dollar index firmed.kitco+3

Oil added fuel to the move. WTI crude settled up 6.7% at $102.48 a barrel and Brent gained 6.3% to $107.63 after tanker attacks intensified around the Strait of Hormuz and Houthi forces seized Yemen's port of Mocha, threatening Red Sea shipping routes. The European Central Bank also raised its deposit rate by 25 basis points to 2.50% on the same day, citing energy-driven inflation from the conflict.tmgm+3

Fed-funds futures now price a roughly 71% probability that the Federal Reserve raises rates by 25 basis points at its September 15–16 meeting. Friday's August CPI report is the final major data point before that decision.kitco

Dollar Debasement Trade Fades

The narrative shift matters as much as the data. The dollar debasement trade — the idea that fiscal excess would structurally weaken the greenback — had been one of gold's most durable supports earlier this year. That argument has quietly lost its grip, according to StoneX market analyst Fawad Razaqzada. "The market is putting aside the dollar debasement argument, at least for now," he said, noting that the dollar responded positively to the PPI report — "textbook behavior rather than debasement behavior".stonex

The pattern of losses across the metals complex reinforced the point: copper fell hardest and gold fell least, the signature of a selloff driven by rates and growth expectations rather than a collapse in safe-haven demand.stonex

Geopolitics Cut Both Ways

The U.S.-Iran conflict around Hormuz continues to support crude above $100, which in turn feeds inflation expectations and bond yields — creating a paradox for gold. Geopolitical risk generates safe-haven demand, but persistently elevated oil prices strengthen the case for tighter monetary policy, offsetting that support. Unless Friday's CPI cools enough to challenge the rate-hike trade, higher yields and a firmer dollar are likely to keep the pressure on bullion.mitrade+1