Gold Defies Gravity Amid Rising US Yields

Gold prices have remained steady at around $4,400 per troy ounce despite rising US yields. The 10-year yield has climbed to 4.74%, and the 30-year yield has surpassed 5.3% for the first time since 2007. However, market-based inflation expectations remain unchanged, meaning real yields have returned to levels seen in late July.

At that time, gold was trading at $4,040 per ounce. Fed Funds futures have increased slightly, but rate expectations are still below end-July pricing, suggesting the jump in yields is not driven by a repricing of the Federal Reserve's path.

The experts point to doubts over the Fed raising rates enough to curb inflation and fiscal risks such as rising government debt, both of which tend to underpin demand for gold. Additionally, there has been a renewed turn in ETF flows after earlier outflows.

Derivative traders are advised to position themselves for continued upward momentum in gold despite the traditional pressure of rising bond yields. This decoupling suggests buying long-dated call options or bull call spreads on gold futures is currently an attractive strategy.