Gold Prices Plummet Nearly 3% Amid Rising Treasury Yields and Hawkish Fed Outlook

Gold prices have taken a hit this week, plummeting nearly 3% as investors weigh in on rising Treasury yields and expectations of further interest rate hikes by the Federal Reserve. The XAU/USD price has dropped to $4,156, its lowest level since August 5.

The situation is largely driven by oil-driven inflation concerns, which have led to a surge in global bond yields to multi-year highs. This has increased the opportunity cost of holding non-yielding assets like gold.

Additionally, traders are pricing in additional monetary policy tightening by the Fed after its recent 25-basis-point hike. The central bank's hawkish outlook and rising Treasury yields have kept the US Dollar near recent highs, adding further pressure on gold.

A packed US economic calendar this week could give gold fresh direction, with key data points including Personal Consumption Expenditures inflation, the ISM Purchasing Managers' Index, and Nonfarm Payrolls. Traders will also be watching for comments from Fed officials for clues on the central bank's next move.