Gold Holds Steady Amid Soaring Yields and Inflation Worries

Gold prices remained steady around $4,335 in early Asian trading hours on Wednesday after experiencing some selling pressure in the previous session. The precious metal faced headwinds due to surging US Treasury yields, which hit their highest levels since 2007.

The rise in long-term borrowing costs from the US to Japan and Germany undermined non-yielding gold. Thirty-year bond yields in the US reached their highest level since 2007 on Tuesday, while expectations of a Bank of Japan interest rate hike as early as September pushed 10-year borrowing costs to a three-decade high.

Additionally, rising energy prices due to ongoing US-Iran tensions and uncertainty surrounding the Strait of Hormuz could stoke inflation worries, weighing on non-interest-bearing bullion. However, softer US inflation data has led investors to scale back expectations of a rate hike by the Federal Reserve, which could drag the US Dollar lower and support gold prices.

Markets are now pricing in a near-65% chance of a Fed rate hold at the September meeting, following weaker consumer price inflation and retail sales. BNY's strategists note that investors prefer explicit inflation protection through gold rather than positioning for a broader reflationary upswing.