Silver Outpaces Gold as Metals Hold Up Against a 5% Treasury Yield

Gold closed Friday at about $4,280 an ounce, up 0.12% on the day, and silver rose 1.42% to roughly $64.77 an ounce, according to the day's precious metals report, which said physical demand pushed metals higher even as rising yields produced a losing week overall. That pairing is notable because a 10-year Treasury yield at 5.18% raises the cost of holding a metal that pays no yield, yet gold and silver did not fall in response.

Central-bank balance sheets show how large these revaluation effects have become. India's foreign exchange reserves fell by $4.9 billion in the week to September 11, to $780.7 billion from a peak of $785 billion, a decline the Economic Times attributed mainly to lower gold valuations rather than to capital outflows. When gold makes up a large enough share of a country's reserves, the weekly reserve figures mainly track the gold price rather than money moving in or out.

The Reserve Bank of India spent the same week defending the currency. The rupee gained 15 paise to close at 95.81 per dollar on Friday as large public sector banks sold dollars, the Economic Times reported, while the benchmark Indian government bond yield rose to 7.14%, its highest in four months. That is the same pattern seen in the United States long end, now appearing in an emerging-market bond curve as well.

For reserve managers, the choice is now explicit. Dollar-denominated debt offers a nominal yield above 5 percent but carries mark-to-market losses if yields keep rising, while gold and silver offer no yield and no counterparty risk. The fact that metals held their level through a bond sell-off indicates that a meaningful share of buyers is choosing the second option.