Gold Prices Weaken Under Rising Yields and Dollar Strength

Ole Hansen, Head of Commodity Strategy at Saxo, analyzed the current state of gold prices in light of rising US Treasury yields and a stronger dollar. According to him, higher real yields make bonds more attractive relative to gold, which pays no interest, while a stronger dollar raises the cost of buying the metal outside the United States.

The data shows that yields on two-year and five-year US Treasury securities have risen by around 150 basis points since late February, with the 10-year yield climbing above 5.1%. The 10-year real yield has reached approximately 2.78%, its highest level in 18 years. Meanwhile, the Bloomberg Dollar Spot Index has gained about 1.5% in September.

Despite these pressures, investment continues to flow into gold, with holdings in gold-backed exchange-traded funds increasing by nearly 50 tonnes since the start of September. This suggests that some buyers are placing greater weight on preserving wealth and protecting themselves against geopolitical and financial risks, even as bonds offer higher returns.