Fed rate hike prospects trigger $1 trillion sell-off in gold, silver

On Monday, the combined market value of gold and silver fell by roughly $1.05 trillion. Gold declined 2.9%, while silver lost nearly 5%.

Gold slid below $4,200 to its lowest since early August, and the sell-off continued at the time of writing.

Before the drop, gold's market capitalisation was about $30.04 trillion, losing 2.9% or approximately $871 billion. Silver's market cap was around $3.65 trillion, falling 4.97% for a loss of about $180 billion. In total, that amounts to roughly $1.05 trillion.

Why Gold and Silver Are Falling

• Fed hike expectations. The CME FedWatch tool shows roughly a 70% probability of an October rate increase. Since gold and silver pay no interest, higher rates reduce their appeal.
• Higher bond yields. The 10-year Treasury yield rose to 5.20%, increasing the cost of holding metals.
• A strengthening dollar. The US Dollar Index (DXY) climbed to 101.39, a two-month high, making metals more expensive for overseas buyers.
• Oil and Iran. Stalled US-Iran talks pushed Brent crude to about $107. Higher oil fuels inflation concerns and rate hike bets.

Last week, several Federal Reserve officials, including Cleveland Fed President Beth Hammack, signalled that policy should remain restrictive. The central bank has already raised interest rates this year.

Gold Price Eyes Head-and-Shoulders Target Near $3,943

Gold is currently trading around $4,160 after a 2.91% daily decline. The move confirms a head-and-shoulders pattern that formed between mid-August and early September.

In mid-September, the price broke through the neckline near $4,320. However, the decline did not accelerate immediately. Gold spent two weeks retesting the $4,300–$4,400 zone before sellers took control.

The pattern's measured target aligns with the 0.5 Fibonacci retracement at $3,943. That level lies within the $3,900–$4,000 support area, roughly 5.2% below the current price. If reached, it could wipe out another $1.5 trillion.

The Relative Strength Index (RSI) is at 37 and falling, still above oversold territory. A daily close above $4,400 would undermine the bearish outlook.

Silver Price Loses Key $62.87 Support

Silver dropped 4.97% to approximately $61.11. The larger decline reflects silver's tendency to swing more sharply than gold.

Since late August, sellers have rejected silver in the $66–$69 zone on three occasions. That area includes the 0.618 Fibonacci level at $68.88. Each rejection produced a lower high, suggesting fading buyer strength.

On Monday, the price broke below $62.87, a level that had held in June, August, and mid-September. A daily close under it could turn that support into resistance.

The next bearish target is the 0.786 Fibonacci level at $54.51, about 11% lower. The RSI is near 40 and trending lower, mirroring gold.

A recovery above $62.87, followed by a break of the $66–$69 zone, would invalidate this outlook.

What to Watch This Week

US labor data is next. ADP payroll figures arrive Wednesday, followed by ISM Manufacturing and jobless claims on Thursday.

Friday's nonfarm payrolls report is the key event. A strong reading could lift rate hike expectations and extend pressure on both metals, while a weak one may allow a rebound.