[Bearish for precious metals]
Fed officials made intensive hawkish remarks, and expectations for an October rate hike rose rapidly.
After the FOMC meeting, several Fed officials released intensive hawkish signals, further reinforcing expectations of a resumption of the rate hike cycle: Minneapolis Fed President Kashkari said inflation in "every aspect" of the US economy is still too high; Richmond Fed President Barkin said there is still a possibility of further rate hikes and that current high inflation risks being transmitted to future prices; Fed Governor Barr said on September 24 that "inflation is not clearly moving toward the 2% target in a timely manner"; officials such as Goolsbee and Musalem also expressed support for further rate hikes. The collective hawkish stance of officials drove market expectations for another rate hike in October to rise rapidly, with the market pricing the probability of at least a 25 basis point hike at the October Fed meeting at around 75%. US Treasury yields and the US dollar index rose together, exerting sustained pressure on precious metals.
The 10-year US Treasury yield broke above 5%, and real interest rates hit multi-year highs.
Driven by the Fed's hawkish rate hikes, sticky inflation, and fiscal supply pressure, the 10-year US Treasury yield broke above the key 5% level this week for the first time since October 2023, closing at 5.01% on September 18; the 2-year yield rose to 4.76%; the 30-year yield remained near 5.34%. The broad rise in nominal rates pushed real interest rates higher, with the 30-year TIPS yield breaking above 3%, significantly increasing the holding cost of precious metals.
The US dollar index broke above 101 to hit a new high since July, and non-US currencies came under broad pressure.
Driven by rising US Treasury yields and the Fed's hawkish stance, the US dollar index strengthened continuously this week, breaking above the 101 level on September 23 to reach its highest level since July. The sharp strengthening of the dollar directly reduced the global allocation attractiveness of dollar-denominated precious metals, while the depreciation of non-US currencies weakened the purchasing power of overseas investors for gold, exerting strong pressure on precious metals. On September 23, spot gold fell notably, dragged down by the stronger dollar.
The three-hour US-Iran talks revealed substantial differences, and Iran's harsh conditions left the prospects for de-escalation unclear.
Although the US and Iran resumed contact for the first time since July during the UN General Assembly, the three-hour talks made limited substantive progress. Iran said the talks were held "at the request of the US side" and were aimed only at "conveying the conditions for reopening the Strait of Hormuz," and it put forward four harsh conditions: a permanent halt to military actions against Iran and its regional allies, the lifting of the maritime blockade and all sanctions, the return of frozen assets, and compensation for war losses. These conditions are almost impossible for the US to accept. Iranian President Pezeshkian struck a tough tone in his UN General Assembly speech on September 23, vowing to "never kneel in surrender," while US representatives walked out midway through the address. Although the two sides plan to hold further talks in the near term, their core positions remain sharply opposed, leaving the prospects for geopolitical de-escalation highly uncertain. If negotiations break down, the situation could escalate again, and the risk of an oil price rebound persists.
[Bullish for precious metals]
Gold prices showed signs of decoupling from interest rates during the week, with gold ETF holdings hitting a seven-month high
A noteworthy structural development emerged during the week: despite the 10-year Treasury yield breaking above 5% to its highest level since October 2023, gold did not crash as conventional logic would suggest. Instead, SPDR Gold ETF holdings rose to 1,055.98 mt, the highest level in seven months. In the short term, gold prices are gradually decoupling from real interest rates, and ETF holdings are also showing signs of decoupling from yields, reflecting that investors continue to increase gold allocations even in a high-rate environment. Behind this lies long-term concern over fiscal sustainability, US dollar credibility, and geopolitical risks. This structural shift is providing bottom support for gold prices unlike that seen in previous cycles.
US-Iran diplomatic contact resumed at the UN General Assembly, with oil prices retreating from highs and easing near-term inflation pressure
During the 81st UN General Assembly, a diplomatic thaw emerged between the US and Iran: on September 22, Iranian Foreign Minister Araghchi and US presidential envoy Witkoff held a three-hour meeting brokered by Qatar, marking the first contact between the two sides since the July ceasefire agreement collapsed. Trump called the talks "productive" and plans to hold further discussions in the near term. Driven by expectations of geopolitical de-escalation, Brent crude pulled back from above $100/bbl to around $97, while WTI briefly fell below $90. Energy-driven inflation pressure eased in phases, and the urgency for continued Fed rate hikes diminished at the margin.
Fed rate hike "lands," with the short-term effect of exhausted bearish catalysts emerging
The Fed's 25bp rate hike to 3.75%-4.00% had been fully priced in by the market (with a probability exceeding 90% before the meeting), and precious metals did not experience panic selling after the decision was announced. The short-term reaction reflected a "buy the expectation, sell the fact" logic of bearish exhaustion. After the hike, market focus shifted from "whether to hike" to "how many more hikes," with near-term tightening anxiety digested in phases, providing precious metals with a window for technical repair.
[Macro summary]
This week, the precious metals market closed lower amid multiple shocks: Fed officials collectively struck a hawkish tone, the US-Iran situation first eased and then turned volatile, and the US dollar broke above 101. Spot gold plunged 1.7% on September 23, breaking below the $4,300/oz level to hit a low of $4,283, a recent low, with a cumulative weekly decline of about 2%. The market's core contradiction has shifted from "whether the rate hike will land" to "whether the rate hike cycle will restart": the dot plot hinting at another hike within the year, officials' intensive hawkish remarks pushing up expectations for an October hike, US Treasury yields breaking above 5%, and the US dollar index breaking above 101 constitute the main pressures; although the three-hour US-Iran talks resumed contact, the differences remain huge and the prospects for de-escalation are unclear. If negotiations break down, an oil price rebound will further intensify inflationary pressure. However, signs of gold prices decoupling from interest rates and ETF open interest hitting a seven-month high provide bottom support. Going forward, focus on whether the follow-up US-Iran talks can achieve substantive breakthroughs, speeches by US Fed officials, and US economic data, and be wary of medium-term adjustment pressure under the resonance of an officially launched hawkish rate hike cycle and a stronger US dollar.
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