The precious metals sector fell 1.7% over the month, with Gold and Silver going in opposite directions. Strategists at Société Générale note that higher yields deplete the appeal of the yellow metal.

Gold lost ground and Silver posted moderate gains

“Gold (-1.9%) retreated further in the month. Downward pressures soon emerged in the form of a stubbornly tight US labour market and higher-than-expected US inflation. This sent Gold prices lower as higher inflation suggests a growing need for further US Fed target rate hikes this year, and potentially into next. Additionally, a solid US job market could help the Fed raise rates without hurting the economy in the short term, hence making the policy more politically acceptable.” 

“Higher yields would deplete the appeal of non-interest-generating precious metals.”

“The only relief potentially preventing further Gold price retreats came from lower US consumer confidence and slightly decreasing 10y US real rates, down 14 bps in the month.”

“Silver (+0.4%) posted moderate gains, despite an energetic beginning to the month. The rest of the month was marked by regular orderly retreats.”