Gold Tumbles Below $4,300 as Treasury Yields Soar

US Treasury yields have reached nearly 20-year highs, causing gold prices to plummet below $4,300. The 30-year U.S. Treasury yield rose to 5.3960% intraday on September 15, while the 10-year U.S. Treasury yield touched 5.047%. These long-term yields are being driven by inflation and monetary policy expectations.

Higher energy costs have increased the risk of U.S. inflation remaining high, reinforcing market expectations that the Federal Reserve will continue to tighten monetary policy. The market widely expects a 25 basis point interest rate hike at the September meeting, with a probability of around 90%. Morgan Stanley predicts this will happen and potentially again in December.

A high-interest-rate environment increases the opportunity cost of holding gold, while the strengthening U.S. dollar index puts additional downward pressure on gold prices. The daily chart of gold shows that it has broken below the $4,300 mark, with a potential short-term recovery if it holds above the 60-day moving average.