Gold Prices Plunge as Oil Spikes and Bond Yields Rise
Gold prices plummeted over 2% on Tuesday as the US dollar received a boost from surging oil prices and rising bond yields.
The sharp escalation in U.S.-Iran tensions, coupled with a global bond rout driven by inflation and fiscal debt worries, led to the decline. The US Central Command launched strikes against Iranian targets, while Iran retaliated by carrying out attacks on US military bases in Jordan.
Oil prices skyrocketed 5.1% to $95.13 per barrel, with Brent crude topping $90 per barrel for the first time since June 11. This surge is attributed to increased tensions in the Middle East and concerns about supply disruptions.
The sell-off in US Treasury yields and other major bond markets intensified on Tuesday, with the benchmark 10-year yield hitting its highest level since November 2023. Expectations of a Federal Reserve rate hike in September have increased following Federal Reserve Chair Kevin Warsh's hawkish keynote address at the Jackson Hole Economic Policy Symposium.
The latest Job Openings and Labor Turnover Summary (JOLTS) showed US job openings in July were lower than expected, but still near a two-year high. The FedWatch tool indicates that the probabilities of a quarter-point hike in September stand at about 68%.