Gold Prices Plummet Amid Strong Dollar, Rising Bond Yields

Gold prices plummeted by 3% on Wednesday, while silver dropped 5%, before recovering from their lows. This decline comes as a surprise, considering gold had remained relatively stable until last week despite a strong dollar and rising bond yields.

The current economic environment is challenging for gold, with the Federal Reserve's hawkish stance in September and monetary tightening by the European Central Bank and Bank of Japan driving up interest rates and sending bond yields soaring. However, central banks remain key supporters of gold prices, purchasing 23 tonnes in July alone, according to the World Gold Council.

Despite elevated oil prices, which are contributing to higher inflation expectations, gold's long-term trend remains bullish. The near-term picture is less convincing, but a technical bullish signal could re-align price action with the longer-term outlook.