Gold Prices Plummet to Seven-Week Low Amid Surging Treasury Yields and Fed Hike Bets

Gold prices plummeted to their lowest level in seven weeks on Monday, falling 3% to around $4,156 per ounce. This marks a significant decline from its previous high and has sparked concerns among investors.

The selloff is largely attributed to the surge in U.S. Treasury yields, which have risen above 5.2%. Higher yields typically weigh on gold as it pays no interest, making yield-bearing assets like U.S. Treasuries more attractive. The benchmark 10-year Treasury yield has also climbed above 5.3%, adding pressure on gold.

UBS analyst Giovanni Staunovo attributed the recent weakness in gold to higher oil prices and growing expectations for additional U.S. rate hikes, which could keep real yields and the dollar elevated, increasing the opportunity cost of owning gold.

Veteran commodities expert Ole Hansen warned that gold's resilience is facing its 'toughest test yet,' citing the surge in real yields, a stronger dollar, and gold's break below $4,230 per ounce. He cautioned that while ETF demand remains resilient, tighter financial conditions could create another source of pressure.

On the other hand, economist Peter Schiff took a more bullish view, urging investors to 'buy now' despite rising bond yields. He argued that their potential impact on economic growth, federal deficits, and inflation could ultimately support precious metals.