Precious Metals Plunge as Strong Jobs Data Fuels Rate Hike Bets

Precious metals suffered a broad sell-off on Friday, led by a sharp drop in silver and gold, after a stronger-than-expected U.S. jobs report reinforced expectations that the Federal Reserve will keep interest rates higher for longer. The sell-off underscores the mounting pressure on non-yielding assets as the central bank prioritizes fighting inflation fueled by the ongoing war in the Middle East.

Gold Slumps as Rate Hike Odds Jump

Spot gold fell 2.2% to $4,375.19 per ounce at 10:05 a.m. EDT, heading for a weekly loss of about 3.6%. U.S. gold futures for August delivery dropped 2.2% to $4,405.10. The decline accelerated after the Labor Department reported that nonfarm payrolls increased by 172,000 in May, far exceeding the Reuters poll forecast of 85,000. The strong labor market data prompted a jump in U.S. Treasury yields, raising the opportunity cost of holding gold.

“We’ve got payrolls that came in fairly significantly over what was expected,” said Bart Melek, global head of commodity strategy at TD Securities. “In light of the fact that we continue to have the war in Iran and very large energy prices and inflationary pressures, it makes it quite unlikely that the Fed is in any mood whatsoever to lower rates. The implication for gold here is that the cost of carry is getting quite high.”

According to CME Group’s FedWatch tool, markets are now pricing about a 68% chance of a rate hike in December, up from roughly 50% before the report. Bullion has fallen more than 16% since the U.S.-backed war with Iran began in late February, as the conflict has driven oil prices higher and stoked inflation fears.

Silver, Platinum, and Palladium Hit Hard

The sell-off extended across the precious metals complex. Spot silver plunged 5.8% to $69.50 per ounce, while platinum dropped 3% to $1,842.70, and palladium slid 1.6% to $1,299.25. The outsized move in silver reflects its dual role as both a monetary metal and an industrial commodity, making it particularly sensitive to rate hike expectations and economic growth concerns.

Banks Quietly Boost Bitcoin ETF Exposure

In a contrasting development, U.S. banks quietly doubled their Bitcoin ETF exposure in the first quarter of 2026, even as the broader professional investor base reduced holdings by 17%, according to a CoinShares analysis of quarterly 13F filings. JPMorgan Chase added 3,000 BTC, Wells Fargo added 4,000 BTC, and Intesa Sanpaolo entered the Bitcoin ETF market for the first time with a 1,600 BTC position. Citigroup also filed for the first time, disclosing a 97 BTC position, and announced plans to launch infrastructure integrating BTC into traditional financial systems.

Banks collectively added 7,800 BTC during the quarter, bringing their total holdings to 15,200 BTC, a 339% increase year-over-year. The bank gains ran against the direction of the overall professional cohort, as total 13F filer holdings fell from 313,000 BTC to 261,000 BTC. Hedge funds and brokerages accounted for roughly 96% of the reduction, with hedge funds cutting exposure by 31,400 BTC and brokerages reducing by 18,800 BTC.

The divergence between banks and other institutional players highlights a growing strategic split in how professional investors view digital assets. While hedge funds and brokerages reduced risk amid the precious metals rout, banks appear to be positioning for long-term adoption, potentially viewing Bitcoin as a portfolio diversifier alongside gold.

Outlook

With the Fed firmly on hold and the labor market remaining resilient, the near-term outlook for precious metals remains challenged. However, the war in the Middle East and elevated energy prices continue to underpin inflation, which could eventually support gold as a hedge. The contrasting moves in Bitcoin ETF flows suggest that institutional investors are re-evaluating their asset allocation strategies, with banks increasingly embracing digital assets as a complement to traditional safe havens.

1. Gold fell 2.2% to $4,375.19 after a stronger-than-expected jobs report boosted rate hike expectations.
2. Silver plunged 5.8%, platinum dropped 3%, and palladium slid 1.6% in a broad precious metals sell-off.
3. U.S. banks doubled Bitcoin ETF exposure in Q1 2026, adding 7,800 BTC, even as hedge funds and brokerages reduced holdings.
4. The Fed is now pricing a 68% chance of a rate hike in December, up from 50% before the jobs data.

Sources: CNBC, CoinMarketCap Academy