Gold, Silver ETFs Fall Up to 2% as U.S. Jobs Data Raises Rate Hike Bets

Gold and silver exchange-traded funds (ETFs) came under pressure on September 7, with several schemes falling more than 1% as expectations of higher U.S. interest rates weighed on bullion prices. 

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The selling followed stronger U.S. jobs data, which increased the possibility of a Federal Reserve rate hike at its September 15-16 meeting. Investors are also waiting for US inflation data due later this week, which could provide further indication of the central bank’s policy direction. 

All gold ETFs were trading in the red. ICICI Prudential Gold ETF declined 1.7%, while SBI Gold ETF fell 1.72%. Nippon India ETF Gold BeES was down 1.6% and Tata Gold ETF slipped 1.54%. 

Silver ETFs also moved lower during the session. Nippon India Silver ETF declined 1.56%, Tata Silver ETF fell 1.55% and ICICI Prudential Silver ETF dropped 1.45%. 

Bullion prices also decline 

The weakness extended to bullion, which fell as much as 1% to below $4,400 an ounce. 

Gold had already declined by a similar margin in the previous session after U.S. data showed that nonfarm payrolls increased sharply in August, while the unemployment rate remained unchanged. The data strengthened expectations that the Federal Reserve could raise interest rates at its September meeting. 

Market pricing also reflected the change in expectations. Traders were assigning about a 60% probability to a rate increase in September. 

Higher interest rates can weigh on bullion because gold does not generate interest income. 

US inflation data in focus 

With the Federal Reserve's September 15-16 meeting approaching, investors are now looking towards the upcoming U.S. inflation data for further clues on the interest-rate outlook. 

Meanwhile, developments around the Strait of Hormuz have also added to inflation concerns. Iran said it had targeted three oil tankers in the strait along with several U.S.-linked ships, following American attacks on vessels over the weekend. 

For now, gold and silver ETFs remain under pressure as markets assess the impact of stronger U.S. employment data and the possibility of tighter monetary policy.