Gold Prices Plunge Amid Rising Yields and Geopolitical Tensions

The global gold market experienced a significant downward pressure on Tuesday (August 18), leading to a nearly 2% drop in spot gold prices. The price of spot gold fell by 1.85% to close at $4,334.65 per ounce, while New York December futures declined by 1.2% to settle at $4,420.60.

The primary driver behind the pullback was not a deterioration in gold's fundamentals but rather a steep rise in U.S. Treasury yields and concerns over energy-driven inflation stemming from geopolitical tensions in the Middle East. The yield on the U.S. 30-year Treasury note briefly rose to its highest level since mid-2007, while long-term borrowing costs in other major economies touched multi-decade highs.

A senior precious metals strategist noted that the steepening of the yield curve serves as a resistance signal for gold, and the continued strength in oil prices further reinforces this pressure. Despite recent U.S. economic data not supporting a sharp rise in interest rates, rising energy prices have reignited inflation concerns and kept the bond market vigilant about a 'higher for longer' interest rate path.

The Strait of Hormuz crisis has added to the uncertainty surrounding energy supply shocks and global supply chain disruptions. The escalating tensions between the U.S. and Iran have pushed up oil prices, with Brent crude and U.S. crude oil futures closing at their highest levels in over three weeks.