Gold Buckles Under Warsh.
Gold lost more than 6% in September, ending a two-month advance. Tighter US monetary policy and a sharp rise in real yields outweighed persistent geopolitical risk and steady physical demand.
Spot prices reached a monthly high of about $4,500 an ounce on 3rd September and fell to an intraday low of $4,110 on 28th September, a peak-to-trough range of nearly $390. The metal closed the month near $4,160.
The main catalyst of the push lower was the Federal Open Market Committee meeting of 15–16th September. The Committee raised the federal funds target range by 25 basis points to 4.0%, its first increase since 2023. Chair Kevin Warsh cited a resilient labour market, continued economic expansion and inflation of about 3.7%, which he attributed largely to tariffs and higher energy prices. The updated Summary of Economic Projections puts the median funds rate at 4.1% at end-2026 and expects inflation to ease to 3.9% in 2027. Most participants indicated that further tightening was still possible.
Gold traded near $4,353 before the decision and had fallen 2.4% to about $4,250 by mid-afternoon New York time.
Rates markets drove the decline. The 10-year Treasury Inflation Protected Securities yield rose by about 44 basis points, the largest monthly increase in four years. The nominal 10-year yield ended near 5.3% and the 30-year reached its highest level since 2002. Higher real returns on fixed income raise the opportunity cost of holding a metal that pays no yield, which led to heavy reductions in leveraged and speculative positions.
On 30th September a stronger US dollar erased early gains that had followed softer core PCE inflation data and an upward revision to second-quarter GDP growth, from 1.5% to 2.2% annualised. At month-end, futures markets were pricing a probability of about 89% that the Fed would raise rates again in December.
The conflict around the Strait of Hormuz, now in its eighth month, gave little support. Brent crude is still about 70% higher year-to-date. The conflict now affects gold mainly through inflation and interest rate expectations rather than through demand for a safe haven.
The surprising factor was even with all this happening the physical demand actually held up well. Central banks, exchange traded funds and Chinese buyers kept accumulating metal, which suggests the selling came mainly from futures markets.
Official-sector buying followed net purchases of 289 tonnes in the second quarter, the strongest second quarter on record.
Silver fell about 13.5% over the month, true to its higher volatility. Gold ends the month roughly 25% below its January record of almost $5,600 but is still up year-on-year.
Red Sea Lifts Brent
Brent gains about 10% in the past month as attacks on Saudi export routes add to the long-running Hormuz blockade.
Crude oil also rose sharply in September. The conflict in the Middle East spread beyond the Strait of Hormuz and began to threaten the routes Gulf producers had been using to get around it. Brent, the global benchmark, rose about 9.5% over the month. It touched around $110 a barrel in mid-September and stood near $102.50 on the morning of 30th September, more than 50% higher than a year earlier. WTI held its usual discount to Brent and traded at about $92.50 early in the month.
The Strait of Hormuz normally carries about a fifth of the world’s seaborne oil. It has been largely closed since the US-Israeli strikes on Iran on 28th February. In September, ship tracking data put daily transits at about 12–13% of pre-war levels. US-escorted crossings averaged about 27 a day. The US blockade of Iranian ports, reimposed on 12th July, has stopped laden Iranian crude tankers from reaching open water.
The month opened with an escalation. On the 1st September, under a new “tanker for tanker” policy, US forces struck two Iranian state tankers and about 100 military targets. Iran responded with about 25 ballistic missiles and a wave of drones. Several days later, the US hit three more Iranian tankers, one of them near the Kharg Island export terminal, after Tehran fired missiles at a US aircraft carrier and destroyer.
What moved the market most in September was the threat to Saudi Arabia’s alternative export routes. Early in the month, Houthi attacks forced operations to halt at facilities including the 400,000 barrel-a-day Jazan refinery. Days later, a drone strike disabled a main pumping station on the 1,200-kilometre East-West Pipeline. That line had been carrying up to 4 million barrels a day to the Red Sea port of Yanbu and repairs were estimated at three to five weeks.
Meanwhile, the Houthis seized the Hanish Islands near the Bab el-Mandeb strait, increasing the risk to Red Sea shipping. Then to add more fuel to the fire on the 24th September they claimed attacks on Aramco facilities at Yanbu and Brent rose above $108 during the session.
Saudi output in August fell to about 6 million barrels a day, the lowest in more than 30 years. At its September meeting, OPEC+ kept October production unchanged. It had already completed the rollback of 1.65 million barrels a day of voluntary cuts and approved a new mechanism for assessing members’ production capacity.
OECD commercial stocks were 66.5 million barrels below their five-year average. Prices eased late in the month as diplomacy at the UN General Assembly and partial recovery of Gulf exports took some of the pressure off.