Bond Markets Outshine Gold Amid Rising Yields and Inflation Expectations
The safe-haven bid for gold is losing momentum as bond markets gain traction. The current geopolitical tensions are pushing inflation expectations and Treasury yields higher, making it more attractive to hold bonds over bullion.
Gold's price has fallen despite investors' concerns about war, as the opportunity cost of holding non-interest-bearing assets becomes too high. A US 10-year Treasury yield recently exceeded 5.2%, while the dollar strengthened due to rising interest rate expectations.
The upcoming August Core PCE report on September 30 will be a crucial indicator for gold's future. A consensus estimate suggests a 0.3% monthly increase, but a hotter reading would strengthen the case for the Fed to keep tightening monetary policy and push Treasury yields and the dollar higher.