Gold and silver weakened on Monday as investors shifted toward U.S. government bonds, driving yields higher ahead of a closely watched Federal Reserve meeting. With markets recalibrating expectations for monetary policy, renewed pressure on precious metals reflects broader uncertainty across global risk assets — including those closely monitored in Israel’s financial sector.

Bond yields rise as traders position for a cautious Fed

The latest move in metals markets comes as benchmark U.S. 10-year Treasury yields climbed above recent weekly lows, increasing the appeal of interest-bearing assets relative to gold. Because gold offers no yield, rising rates typically exert downward pressure on its price. Analysts say traders are bracing for a Fed message that reinforces its commitment to keeping inflation on a controlled downward path.

While inflation has cooled, policymakers remain wary of loosening conditions too quickly. Expectations of a more gradual easing cycle have pushed real yields higher, adding to the headwinds faced by precious metals. The shift also comes as global investors reassess portfolio hedges in an environment where interest-rate volatility remains elevated.

Precious metals pull back from recent highs

Gold, which recently tested multi-month highs, slipped as investors locked in profits and rotated into bonds. Silver, which tends to be more volatile due to its industrial applications, fell even more sharply. Analysts note that the combination of higher yields and heightened uncertainty around the Fed’s communication makes metals markets especially sensitive in the near term.

In Israel, where gold is frequently used as a hedge during geopolitical and currency fluctuations, the retreat reflects global rather than local dynamics. The strengthening U.S. dollar — a typical reaction when yields rise — has added additional pressure on metals, making them more expensive for non-U.S. buyers.

Market positioning shows caution ahead of Fed’s inflation outlook

Investors are now focused on whether the Fed will reinforce its preference for a data-driven approach to future rate cuts. Any indications that policymakers see risks of inflation stagnation could extend the rise in bond yields. For gold and silver, such a signal would likely cap short-term rallies and encourage further defensive positioning among institutional investors.

Still, some analysts point out that underlying demand for metals remains intact due to structural factors such as central-bank gold purchases, geopolitical tensions, and the long-term transition toward green energy — an area that increases industrial demand for silver. These drivers may limit the downside even as macro conditions create near-term volatility.

Looking ahead, traders will closely monitor the Fed’s statement and economic projections for clues about the pace of monetary easing. Should policymakers strike a more dovish tone than expected, gold and silver may regain momentum as yields retreat. Conversely, a firmer stance on inflation control could extend the metals’ pullback. With uncertainty elevated, markets will remain highly reactive to shifts in bond yields, inflation data, and the global risk environment.