Gold Drops Below $2,130 as Dollar Strength and Yields Rise
Gold prices fell 0.5% on Tuesday, closing at $2,120.16 per ounce, as a stronger U.S. dollar and climbing Treasury yields weighed on the market. The dollar’s strength was partly fueled by political instability in France, which drove the euro to its lowest level in 17 months. Rising yields also increased the opportunity cost of holding gold, a non-yielding asset, prompting some investors to shift toward bonds.
Other precious metals also declined, with silver dropping 1.2% to $60.35 per ounce, platinum falling 1.3% to $1,703.71, and palladium slipping 1.4% to $1,161.00. The U.S. Dollar Index rose 0.1% to 102.27, nearing yearly highs. Governor of the Bank of France Emmanuel Moulin warned that France’s fiscal challenges could lead to higher borrowing costs, further supporting the dollar’s rally.
The bond market selloff continued, with 20-year and 30-year Treasury yields hitting multi-decade highs of 5.735% and nearly 5.7%, respectively. Rising yields and inflation concerns have reduced expectations of a Federal Reserve rate hike in October, now priced at just 23%, down from 70% a week ago. The Fed’s September meeting minutes, due Wednesday, could provide further clarity on future rate directions.
Gold has lost over 6% in September and more than one-fifth since the U.S.-Iran conflict began in late February. Analysts at ANZ noted that while gold has recovered slightly from last week’s losses, the metal remains under pressure due to dollar strength and higher U.S. interest rate expectations. Spot gold traded at $2,139.06 per ounce during Asian hours, while silver held steady near $61.05.