Gold Prices Plunge Amid Rising Treasury Yields and Fed Rate Hike Expectations

Gold prices are facing further pressure due to rising US Treasury yields and expectations of additional Federal Reserve rate hikes. The non-yielding metal is losing its allure as investors can earn higher returns on interest-bearing assets.

Spot gold fell by as much as 4% to $4111/oz on Monday, its lowest since August 5, as oil prices climbed amid a stalemate in US-Iran talks and the yield on the benchmark ten-year US Treasury note touched its highest since June 2007. Adrian Ash, head of research at online bullion marketplace BullionVault, said 'Today's fresh multi-decade highs in US borrowing costs have finally seen the gold price give way.'

The two-year Treasury yields, the most sensitive to interest-rate expectations, have risen sharply this month as markets price in a roughly 70% chance of a second consecutive Fed rate hike in October. Higher interest rates tend to weigh on gold because investors can earn higher returns on interest-bearing assets.