Gold Price Plummets as Treasury Yield Hits 5-Year High
Spot gold prices slid to $4,254.30 an ounce on Thursday as the 10-year Treasury yield jumped to its highest level since July 2007 at 5.15%. The price drop of $31.70 is the largest daily decline in two weeks.
The increase in the 10-year real yield to 2.76% has raised concerns about gold's appeal as a hedge against inflation, given that investors can now lock in a guaranteed return of nearly three percentage points above inflation for a decade.
China's central bank added 20.2 tonnes of gold reserves in August, lifting its holdings to 2,387 tonnes over a 22-month streak. The current price sits at the lower-middle part of the $3,935 to $5,589.38 range set in January and August.
A daily close above $4,404 targets $4,694, while a close under $4,225 opens a slide toward $3,935. The 10-year real yield is expected to have an inverse relationship with gold prices, meaning that if it retreats below 2.65%, the price could rise to the $4,315 to $4,370 area.