Gold Prices Tumble as Rising Yields Outweigh Geopolitical Fears
The price of gold is falling despite ongoing geopolitical tensions, a trend that may surprise some investors expecting safe-haven demand to drive prices up. But according to Ali Mortazavi, head of education at TradingView, this decline is primarily driven by rising real yields and a stronger U.S. dollar.
Mortazavi explains that higher inflation does not automatically translate into higher gold prices, as the metal's value can be influenced by other factors such as real yields. When real yields rise, it increases the opportunity cost of holding gold, making it less attractive to investors.
He notes that the U.S. 2-year yield is a useful proxy for Fed-path expectations and has been rising lately. This increase in interest rates makes it more expensive for investors to hold onto gold, causing prices to fall. Additionally, tighter Fed expectations have led to a stronger U.S. dollar, which also puts downward pressure on gold.
Despite the decline in spot gold prices, long-term ETF and central-bank demand remains strong. This means that strategic holders may remain bullish on gold, but short-term pricing can still be dominated by macro funds, futures positioning, and forced liquidation.