Gold Dips as Yields Rise but ETF Holdings Stay Strong

Gold is facing renewed pressure as Treasury yields climb, pushing the precious metal down 0.3% to $4,125. This marks a notable drop from its recent highs above $4,600, with the surge in yields making gold less appealing due to its lack of yield. Higher yields increase the opportunity cost of holding non-yielding assets like gold, contributing to the recent pullback.

However, investor positioning tells a different story. Despite the sharp decline in gold prices, holdings in the SPDR Gold Trust remain near their highest levels in months at around 34 million ounces. This divergence suggests that the pressure on gold is more tied to the rates environment rather than a shift in investor sentiment. The absence of significant ETF outflows indicates that investors are not yet abandoning the gold trade.

The “higher for longer” narrative in the bond market is key here. Gold could continue to face pressure even if yields stabilize at elevated levels, as this reduces the appeal of non-yielding assets. Resilient ETF holdings, however, signal underlying support for gold. If yields eventually settle, this could provide a firmer foundation for a potential recovery.