Gold Under Siege as US Yields Reach 18-Year High

Gold prices continue to decline as US Treasury yields reach an 18-year high. According to Ole Hansen, head of commodity strategy at Saxo Bank, the pressure from rising rates is becoming 'increasingly difficult' to ignore. The COMEX gold futures are trading flat at $4,168 per ounce while silver futures dropped over a percent to $61 per ounce.

The US Treasury yield has climbed to an 18-year high near 2.85%, and short-term interest-rate markets are now pricing another three 25-basis-point Fed hikes by next April. Traditionally, such a sharp increase in the opportunity cost of holding a non-yielding asset would be a major headwind for gold.

Hansen notes that funding stress could become a short-term headwind, with signs of stress emerging at the weaker end of US corporate credit as higher rates increase refinancing risks. However, he also highlights an important divergence: internationally, Gold ETF holdings have continued to recover despite the rise in real yields.