In September, precious metals broadly trended weak, and after the FOMC meeting the market showed a fairly clear weak adjustment pattern.
After the FOMC rate hike, Fed officials remained on a hawkish path, and the risk premium in crude oil was not fully disproven, which pushed the timing for the “peak inflation narrative” to begin its main upward wave further out under the earlier high base.
In the performance of dollar-denominated major asset classes, the Nasdaq reached a new high again, but it remains necessary to watch whether it has the momentum to keep rising; long-end U.S. Treasury yields have struggled to fall, and the dollar index has entered a bullish trend: last week the 10-year U.S. Treasury yield rose above 5.10%, the dollar index rose for two consecutive weeks, and it has now continued up above 101, hitting a near two-month high.
Returning to precious metals themselves, there are only two conditions that can break the negative feedback loop of “energy inflation-forced rate hikes-pressure on gold and silver”: oil prices fall, or data weaken. With U.S. economic data unlikely to truly weaken given strong AI-driven growth at present, and with uncertainty around the U.S.-Iran situation still strong, we believe the timing for precious metals to return to a bullish trend may continue to be pushed back.
At present, bullish funds may be clustered in gold, and its range-bound oscillation characteristics may be more obvious, but silver, platinum, and palladium may move in a more disorderly way, and attention should be paid to how their prices perform near the July lows. The precious metals sector may remain broadly weak. For reference only.
Market review
Last week, the precious metals market overall remained under pressure. Judging by the Wenhua Financial Shanghai Gold VIX measure, the Shanghai Gold VIX fell for four consecutive trading days last week, indicating that the market’s overall sentiment toward a rebound continues to be delayed, while the Shanghai Silver VIX even returned to the level of December 2025, indicating that funds lack a clear expectation for when a real silver rally will begin.
From a trend perspective, last week’s precious metals market still showed pressured oscillation overall. Taking the COMEX gold weighted price as the valuation center, its price reached a medium-term bottom in mid-July, with the bottom price at $3,970-$4,000 per ounce, but on a weekly basis, after two weeks of oscillation, its weighted price lost the key support level of $4,300 per ounce.
Silver and palladium prices are more uncertain. We believe that although their tight balance situation is even stronger than that of gold, funds clearly have not bet on the start of a bullish trend, which echoes the currently low VIX level for silver.
Due to disturbances from the continued strike by Sibanye-Stillwater in Montana and consultations on shutting down the Kwezi mine pit in South Africa, platinum has been more resistant to declines than silver and palladium.
After the China-U.S. talks and with earnings season arriving, U.S. equity market correction pressure is relatively high
Current favorable factors in the U.S. equity market have already been priced in advance, and after reaching new highs the upward structure is fairly distorted. Before the meeting, the Nasdaq had already set a record closing high of 27,288, the S&P clearly formed a double-top structure, and the Dow Jones Industrial Average had already fallen first.
Looking at the overall market structure, the Mag7 ETF rose 5% over the week while the Dow fell below its 20-day moving average. A small number of AI giants alone propped up the index, and new index highs were contributed by a few heavyweight stocks, which may indicate that incremental funds did not enter broadly, but rather that existing funds clustered around certainty in an environment of rising interest rates.
Under this structure, the index is highly sensitive to the earnings and guidance of a single leader such as Microsoft or Meta. Once results disappoint, there is a lack of laggard sectors to absorb the selling pressure. As the U.S. earnings season approaches, with institutions currently clustered together, Micron’s earnings on September 30 and the mid-October earnings season are the most likely windows to trigger one-sided moves.
If AI capital expenditure slows at the margin, crowded long positions will be closed out in a concentrated way, and the damage from “good news fully priced in” will be further amplified by the low-volatility environment.
On nonfarm payrolls, the September employment report will be released on Friday, October 2, the biggest variable during the National Day holiday. With the high base of 162,000 new jobs in August and a 4.1% unemployment rate, market expectations for September have clearly weakened: new jobs are expected to fall to about 75,000-85,000, and the unemployment rate is expected at 4.1%-4.2%.
The two-way implications of the data directly correspond to the post-holiday path for precious metals: if nonfarm payrolls weaken as expected, October rate hike expectations will cool, and gold and silver may see a rebound window; if they again beat expectations, rate hike pricing will move further forward, and COMEX weighted gold will test the intermediate support level of $4,000.
It is worth noting that because domestic markets are closed from October 1-8 for the long holiday while overseas markets trade normally, the nonfarm payrolls result will be fully reflected in the opening gap after the holiday, and positions held before the holiday need to leave sufficient safety margin for this event.
Crude oil prices remain driven by headlines, and precious metals remain suppressed
The confirmation we mentioned in previous reports of “inflation and rate hikes peaking at the same time” was repeatedly delayed in September: the Salalah meeting was postponed first, and then Iran’s “7-day plan” submitted through Qatar, under which the strait would reopen within seven days in exchange for lifting the blockade, sanctions exemptions, frozen asset release, and a regional ceasefire, briefly gave the market hope, but on September 26 Trump publicly rejected the plan, and the oil price decline built on Friday on expectations of a deal was fully retraced at Monday’s open.
The energy backdrop of inflation is difficult to dispel in the short term, and the macro combination of rate hike expectations and inflation falling together, with precious metals beginning a main upward wave, is not currently in place.
From the structure of the risk premium, the roughly $35-$45 risk premium in current oil prices can be divided into three layers: first, the Hormuz layer, with the strait effectively blockaded and about one-fifth of global oil transit restricted; second, the Red Sea/Houthi layer, with the Houthis cutting off the Red Sea coast and the Saudi east-west pipeline as a bypass insurance effectively failing; third, the refined products/refining layer, with U.S. diesel prices hitting record highs, refinery utilization at 98%, and market rumors that the United States may impose a diesel export ban.
The three premium layers are mutually independent, and the fading of any one is not enough to drive a trend reversal lower in oil prices, so overall support below oil prices is strong. Much of the current risk premium mainly stems from ambiguity in the U.S. stance.
Since the United States restarted military action against Iran, Trump has never given a written commitment on ceasefire conditions, and his public statements have focused only on “not allowing Iran to have nuclear weapons,” with strike targets limited to nuclear facilities and military facilities; regarding “under what conditions negotiations would resume,” the U.S. side has remained at the stage of combining verbal pressure with military deterrence.
This leaves the fading of crude oil’s risk premium without a credible path. The essence of the U.S.-Iran contest has evolved into the political question of whether Trump is willing to make substantive concessions before the midterm elections on November 3. The timing of an oil price decline is therefore difficult to predict, and the pressure on precious metals will be extended accordingly.
U.S. Treasury yields and the dollar are rising together, and tail risks should be guarded against
After the September FOMC, U.S. Treasury pricing entered a new framework: Warsh explicitly abolished forward guidance, meaning every subsequent policy meeting is a “live broadcast,” and the power of data to set prices has been magnified to the extreme; the statement removed the attribution to “supply shocks,” and the Fed no longer promises to “look through” energy inflation, so every fluctuation in oil prices is directly transformed into a repricing of the rate path.
In addition, the Fed continues to turn hawkish. Last Friday alone, three Fed officials released hawkish signals and warned about inflation risks. St. Louis Fed President Musalem said inflation may remain above target for a long time and further rate hikes are needed; Boston Fed President Collins supported continued tightening. Cleveland Fed President Beth Hammack said she worries that persistently high inflation may gradually lead the American public to regard high prices as normal, and the Fed must not let that happen.
The U.S. Treasury option volatility index, MOVE, subsequently spiked to a stage peak; although MOVE has clearly fallen back since the start of this week, and the above uncertainty repricing has shown more of an event-driven pulse characteristic, with the market digesting rather than continuously amplifying this new framework, the peak of bond market panic has probably passed.
At the rates level, the 10-year U.S. Treasury yield rose above 5.10%, a 19-year high, and touched 5.20% intraday, while the 30-year hit a high since 2004; a chain of strong data pushed pricing forward: on September 23, the Markit composite PMI came in at 58.4, a high since July 2021, and rate hike probability jumped that day, followed by initial jobless claims falling to 197,000 and durable goods orders beating expectations, with market pricing shifting from “two hikes this year” to “three cumulative hikes.”
The dollar index simultaneously broke above 101 and hit a near two-month high, forming a double blow to non-yielding assets together with real rates, with 10-year TIPS around 2.8%.
From a bond market perspective, we believe tail risks have not been removed, but their nature has shifted from “ready to explode” to “threshold watching”: first, the nonlinearity of rates, where every 10 basis points above 5% may create resonance among pension and insurance fund allocation rebalancing and CTA trend fund stop-losses, and it is necessary to track whether the 10-year can hold above 5.20% during U.S. trading hours, which is the dividing line between risk moving from “observation” to “alert”; second, the France-Germany spread has widened to 110 basis points, the highest since the 2012 European debt crisis, suggesting global sovereign credit is being repriced in sync, though its evolution is more of a slow variable than an immediate threat; third, fiscal dominance, with U.S. debt above $40 trillion, buyback execution below its cap, and the yen weakening after the Bank of Japan raised rates, is a long-term constraint rather than a near-term concern.
The combination of falling MOVE and a low VIX at 14.87 shows that the probability of short-term systemic risk is declining; however, risks already priced in the bond market have not yet been fully priced in by the stock market, and this divergence still deserves tracking in October.
Summary
Overall, the main theme for major asset classes in September is still difficult to call clear: strong data, a hawkish Fed, a strong dollar, and high oil prices provided fourfold suppression throughout the month, and precious metals underwent continued adjustment.
With U.S. Treasury yields persistently high and the “peak inflation narrative” repeatedly delayed, the allocation side may need to consider reducing risk exposure rather than waiting for a bottom-fishing opportunity under the inflation-cooling narrative. As a sector with strong forward-looking and predictive characteristics, precious metals may lead other assets to the downside in October.
For the valuation center of precious metals, there are currently three buffers below gold prices: first, the official demand floor formed by central bank gold purchases and reserve diversification, with China’s central bank increasing holdings for 21 consecutive months and global gold ETFs seeing record inflows in August; second, against the backdrop of $40 trillion in debt and fiscal dominance, gold’s “U.S. Treasury substitution value” has risen rather than fallen as the rate hike cycle deepens; third, the $4,000 area corresponds to the market equilibrium level when July rate hike pricing was only 2.5 hikes, while current pricing has deepened to more than 3 hikes, so the marginal damage from hawkish pricing is weakening.
Therefore, our baseline judgment for October is a “weak range rather than one-sided decline”: COMEX gold’s $4,000 area is the intermediate support zone, and $4,400-$4,500 is the pressure band. Within the range, selling rallies and buying dips is better than betting on direction.
The conditions that would disprove the call for precious metals to lead declines are also clear: if oil prices trend lower, September nonfarm payrolls weaken significantly, or long-term government bond yields in the U.S. and Europe surge, then if any one of the three appears, precious metals will complete bottom formation before other assets; conversely, if the 10-year yield holds above 5.20% and triggers systemic deleveraging, gold and silver will first be sold off along with liquidity and probe lower, after which a layout window for medium- and long-term funds will appear.
In terms of operations, it is advisable to control positions, respond with range-based thinking and options structures, and avoid heavily betting on direction before the negative feedback loop is resolved. For reference only.
Author: Yan Junyong, Practicing License No.: F03135728, Investment Consulting No.: Z0024434, Precious Metals Analyst at Chang’an Futures. Sina’s large cooperative platform for futures account opening is safe, fast, and secure.
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