Gold Plunges $83 as Treasury Yields Surge and Middle East Tensions Rise
Gold prices plummeted by $83 on Tuesday, August 18, as a surge in Treasury yields and a tense diplomatic situation in the Middle East weighed on investor sentiment. The precious metal had reached a 74-day high of $4,473.40 per troy ounce on Monday but gave back most of its gains in the New York session.
The key driver behind gold's decline was a broad global bond selloff, which pushed the 10-year Treasury yield to approximately 4.72%, near a one-year high. The 30-year Treasury yield climbed above 5.33%, its highest reading since the global financial crisis. Rising yields make bonds more attractive on a relative-return basis, prompting capital to rotate away from gold.
Additionally, the U.S. Dollar Index rose to 99.67, providing an added headwind for dollar-denominated commodities. The breakdown in Iran diplomacy further exacerbated the selling pressure, with Jared Kushner indicating that Tehran remained unwilling to accept Washington's terms and the Strait of Hormuz being declared under Iranian control.
Despite Tuesday's loss, gold remains up over 10% on the month and more than 33% year-over-year, supported by central bank demand. China's central bank added 19.9 tonnes in July, its 21st consecutive month of accumulation.