Gold fell 1.2% on May 13 to close at $4,697 per ounce, retreating from record highs as the scorching 6% PPI inflation report paradoxically worked against the precious metal. Rising real yields -- the 10-year TIPS yield surged to 2.15% -- increased the opportunity cost of holding non-yielding gold, while the dollar index climbed to a three-month high of 104.8.
The selloff came despite gold's traditional reputation as an inflation hedge, illustrating the complex relationship between gold and macro variables. When inflation drives real yields higher and strengthens the dollar, gold typically suffers even as headline inflation rises. GLD, the SPDR Gold Shares ETF, dropped 1.3% on elevated volume.
What happened
Gold opened the session near $4,755 but came under immediate selling pressure after the 8:30 AM ET PPI release. The 6% headline number, while inflationary, triggered a sharp rise in Treasury yields and the dollar as markets priced out remaining rate cut expectations. The 10-year real yield (TIPS) surged to 2.15%, its highest level since November 2023, making zero-yielding gold relatively less attractive. The selling intensified after the Senate confirmed Kevin Warsh as Fed Chair, as his hawkish credentials further reduced the probability of monetary easing. Gold found support near $4,680 in late trading before settling at $4,697. Silver fell 2.1% to $30.80, and mining stocks tracked by GDX dropped 2.4%.
Why it matters
Gold's decline on a day when inflation printed at multi-year highs exposes a common misconception: gold is not simply an inflation hedge -- it is a real-yield hedge. When nominal yields rise faster than inflation expectations, real yields increase, and gold underperforms. The Warsh confirmation adds a structural headwind, as a hawkish Fed Chair is likely to maintain or increase rates, keeping real yields elevated. However, gold's year-to-date gain of approximately 12% reflects ongoing geopolitical risk premium from the Iran-Hormuz conflict and central bank buying.