Gold Tumbles Below $4,100 Amid Soaring Treasury Yields

Gold prices steadied on Tuesday after plummeting to a seven-week low of $4,110.55 per ounce on Monday, marking a decline of almost 4% from the previous day's close.

The sharp drop was fueled by rising US Treasury yields, which climbed to around 5.24% on Monday and remained near that level on Tuesday. This marks a further acceleration from the 5.16% level recorded at the end of last week.

Rising Treasury yields increase the opportunity cost of holding non-yielding assets like gold, putting additional pressure on prices. Expectations for another Federal Reserve rate hike in October have also strengthened, with markets assigning around a 70% probability to an increase in that month and a 96% probability by December.

Oil prices have contributed to the repricing of Treasury yields, with persistent US-Iran tensions keeping crude elevated and reinforcing concerns about higher energy costs fueling inflation. The dollar has also benefited from this dynamic and remains near a two-month high, creating an additional headwind for dollar-denominated gold.

Investor positioning is another factor weighing on gold prices, with global gold ETFs recording their first weekly outflow since mid-July last week. Futures positioning has weakened as well, with managed-money net long exposure falling to approximately 426 tonnes in the week ending September 22.

China's Golden Week, which begins on October 1, could provide a test of physical gold demand. The National Day holiday traditionally marks the beginning of China's peak gold-buying season, when jewellery demand strengthens and retailers rebuild inventories.