Warsh Triggers a Precious Metals Sell-Off

Just a few hours ago, silver was holding above $70.

Now the picture looks completely different.

Gold is down nearly 3%, while silver has fallen around 4%. The main trigger was today’s speech from Fed Chair Kevin Warsh at Jackson Hole.

Warsh made it clear that the fight against inflation is not over and that another rate hike remains on the table. Markets reacted almost immediately.

Expectations for a September rate hike jumped sharply, the U.S. dollar strengthened, and the 2-year Treasury yield climbed from roughly 4.22% to 4.32%.

That is exactly the kind of combination precious metals don’t like in the short term.

Silver is even more interesting to me.

Earlier today, it managed to break above $70 an ounce, which looked like another confirmation of very strong momentum. But the reversal shows just how quickly sentiment in silver can change when the dollar, rates, and speculative positioning all move at the same time.

A brief move above $70 simply isn’t enough.

If this level is going to become an important base for the next leg higher, silver will need to reclaim it — and more importantly, prove that it can stay there.

In my view, today’s move doesn’t change the long-term story for physical gold and silver.

But it is a good reminder that even a strong bull market never moves in a straight line.