Gold Dips on Bond and Oil Pressures While Mexico’s Silver Output Weakens

Gold prices faced a challenging week as rising bond yields and high oil prices weighed heavily on the market. Analysts at Heraeus noted that gold broke through key support levels around $4,250 per ounce, falling to trade between $4,100 and $4,200. The decline came despite gold’s earlier resilience in the face of difficult macroeconomic conditions. High oil prices, with Brent crude trading near $100 per barrel, reinforced concerns about persistent inflation and tighter monetary policy.

The 10-year Treasury yield climbed above 5.3%, its highest level since 2002, while the 10-year real yield surpassed 2.9%, increasing the opportunity cost of holding non-yielding gold. Fed rate hike expectations for the October meeting dropped significantly after recent economic data. Headline PCE inflation held steady at 3.4% year-on-year in August, below expectations, while September non-farm payrolls came in far below forecasts at 29,000, reducing the likelihood of a rate hike.

In the mining sector, Northern Star rejected a takeover bid from Gold Fields, which would have created the world’s second-largest gold producer. Gold Fields offered a proposal worth A$38.7 billion, a 22% premium to Northern Star’s share price. The rejection highlights consolidation pressures in the gold-mining industry as producers seek greater scale and longer-life reserves. Spot gold continued to trade near session lows, last seen at $4,135.54 per ounce.

Turning to silver, Mexico’s production saw a modest increase in July, rising 1.7% from June to 10.56 million ounces. However, output remained 2.3% below July 2023 levels. Mexico, the world’s largest silver producer, accounted for around 20% of global mined supply in 2023. The Silver Institute expects Mexican supply to recover in 2024 after weaker output last year. Spot silver last traded at $60.987 per ounce, up 1.02% on the daily chart.