The culprit was a stronger-than-expected U.S. jobs report for May, which showed employers adding 172,000 positions while the unemployment rate held at 4.3%.
Within that, leisure and hospitality added 70,000 jobs and local government gained 55,000, offsetting a 22,000 decline in financial activities employment.
Like clockwork, Treasury yields surged to 4.55%, and the U.S. dollar index firmed, as traders abandoned near-term rate-cut expectations in favour of a higher-for-longer outlook.
For precious metals, that combination is classically toxic: elevated real yields render bonds more attractive, while increasing the opportunity cost of holding non-yielding assets such as gold and silver.
And yet that macro trigger only tells part of the story.
Silver’s decline was more than double gold’s – a divergence that reveals something important about how the market treats these two metals in moments of stress.
That is, when liquidity tightens, and risk assets sell off (Nasdaq fell 4.2% in the same session), silver gets sold as an industrial and speculative asset before it is bought as a monetary one.
That “Jekyll-and-Hyde” nature is a feature of silver that long-term investors must understand and accept: the aptly named “devil’s metal” can, and often does, outperform gold by multiples in a sustained bull market, but it’s also the metal that takes the hardest hit when the tide goes out.
Simultaneously, a modest deflation of the embedded geopolitical risk premium added further pressure to precious metals, as oil prices settled lower on Friday amid tentative optimism around a diplomatic resolution to Strait of Hormuz tensions.
While those hopes of peace were later dented on Sunday by Iran’s strike on Israel, two tailwinds ultimately reversed in a single session for gold and silver on Friday, resulting in the kind of violent, disorienting sell-off that shakes out weak hands and tests the conviction of everyone else.
Importantly, silver has since regained some ground, rising 1.3% on Monday to $68.76. Gold, on the other hand, has proved more stubborn to move to the upside, increasing by a negligible 0.19% to $4,337.
Still, the burning question for SMR readers remains: Where are gold and silver prices headed next?
On the one hand, higher rates and a stronger dollar point towards more near-term turbulence. On the other hand, any dip could be a glaring opportunity for investors to buy into weakness, before a wave of oil-shock-induced inflation propels both metals to all-time highs and beyond.
That intellectual crossroads is precisely what we’ll explore in today’s article, as we evaluate the macro forces shaping gold and silver’s destiny.
Rate Hike Anticipation Meets Seasonal Stagnation: A Bearish Summer Awaits Gold and Silver?
As we put on our bearish spectacles, our gaze immediately turns to the upcoming FOMC meeting on June 17th – the day that newly appointed Fed Chair Kevin Warsh will show his hand regarding interest rates.
Ahead of that, it’s worth noting Warsh’s intellectual foundations are monetarist to the core, shaped by Milton Friedman’s thinking during his Stanford years and best captured in the title of his 2025 Hoover Institution essay: Inflation Is a Choice.
Of course, that is not the framing of someone who views rising prices as a cyclical accident to be managed at the margin, but a man who – like us – views inflation as a direct consequence of deliberate policy failure.
Nothing in Warsh’s biography represents a better testament to that stance than March 2011, when the then Fed Chair Ben Bernanke pushed for a second round of wholly unnecessary quantitative easing.
In the wake of the GFC, Bernanke’s decision to flood the market with cheap money came at a moment when the financial system had already stabilised, and no genuine emergency remained, in Warsh’s view.
Naturally, at 40 years old with 11 years remaining on his term, Warsh resigned from one of the most prestigious positions in the U.S, unwilling to continue on a trajectory that he fundamentally opposed.
Later, Warsh branded Bernanke’s second round of QE as a “reverse Robin Hood” that widened the wealth gap by inflating asset prices – a morally-loaded critique reinforced by the act of his 2011 resignation.
In 2026, this hawkish rhetoric leads us to believe that Warsh may initially hike to combat inflation, which accelerated to 3.8% (CPI) in April as elevated oil prices continued to reverberate across the economy.
Beyond interest rate decisions and speculation over Fedspeak, there are numerous additional reasons why gold and silver could stagnate, or even mildly capitulate, this summer…
By Sound Money Report and Ted J. Butler
Source: Sound Money Report
