Gold, Silver Drop Again on 'Bond Tailspin' and Weak Demand Fears

The PRICE of GOLD and SILVER fell again Wednesday as a fresh drop in government bond prices pushed long-term interest rates higher once more, while question marks grew over late-2026 demand for the precious metals.

Gold for London settlement dipped through $4300 per troy ounce for the first time in 4 weeks after India's Prime Minister Narendra Modi urged households not to buy gold again as the Hindu calendar's massive autumn festive and wedding season approaches.

Silver meantime touched a new 2-week low at $63.33 before also rallying to trade 9.5% below the peak of last Friday, when global news-wire Bloomberg published a forecast that solar sector demand for the industrially-useful precious metal is heading for a 2nd consecutive annual fall.

With major Chinese PV manufacturer Longi announcing as far back as January that it's begun commercial production of a silver-free PV cell, global solar energy demand for silver may drop 30% this year from 2025, commodities research lead Greg Shearer at major bullion bank J.P.Morgan predicted last month.

The sudden focus on silver PV thrifting comes as China's installed solar power capacity overtakes that of coal for the first time ever, becoming the world No.2 economy's single largest power source according to the National Energy Administration.

Worldwide, renewable energy led by solar power installations will overtake all other sources of power in the next 25 years according to intergovernmental think tank the International Energy Agency.

"Gold and silver are watching the Fed and so are on the back foot accordingly," says brokerage StoneX's precious metals specialist Rhona O'Connell, calling the sell-off in major economy bonds a "tailspin" after US central bank chair Kevin Warsh suggested he wants to hike short-term interest rates to cut the pace of PCE inflation.

Variously blamed on Iran war inflation, crowding out by massive AI borrowing, and continued over-spending by elected governments across the West, longer-term borrowing costs today ticked up to a fresh 18-year high on the Bloomberg Global Aggregate Treasury Index, testing the June 2008 peak at 3.75% per annum.

Global stock markets fell for the 4th session running, cutting the MSCI World Index by 2.3% from mid-August's fresh all-time peak.

Betting in the futures market continued to put a 2-in-3 chance on the US Federal Reserve raising overnight Dollar interest rates at its September meeting in 2 weeks' time, but traders cut the odds of a further rate rise by year's end to 50:50 according to derivatives exchange the CME's FedWatch tool.

"It is possible that bond weakness [which is driving long-term interest rates higher] is now more or less priced into gold and by association silver," says O'Connell at StoneX. "But the undertone from the official sector [where central banks continue buying gold] gives gold more buoyancy.

"Silver is still concentrating on the oversupply in the solar sector [but that should] be relatively short term. Longer term the market is moving into a pre-investment deficit [of silver supply versus demand], and this will expand over coming years, giving the market longer-term support."

Gold prices in Shanghai today touched the lowest since 7 August, dipping to ¥931 per gram before edging higher to show a near-$5 per ounce premium over London quotes.

That was one-third smaller than the typical incentive for new gold imports into the precious metal's No.1 mining, consumer and central-bank gold buying nation.

India's private-sector gold buying could sink from 800 tonnes to 500 tonnes this year, the Confederation of All India Traders (CTI) warned Wednesday, as high gold prices plus steep import duties on bullion dent demand alongside Modi's call for Indian consumers not to buy gold as a patriotic effort to reduce the country's current account deficit with the rest of the world.