US Yields Hit 18-Year High, Gold and Silver Prices Tumble

Gold and silver prices continued to decline on Tuesday, following Monday's sharp drop. The precious metals were under pressure from higher US Treasury yields, which hit an 18-year high of near 2.85%. This has made holding gold a less attractive option for investors, as it does not generate interest income.

Ole Hansen, head of commodity strategy at Saxo Bank, noted that the increase in US 10-year real yields is becoming 'increasingly difficult' to ignore. He highlighted that traditionally, such a sharp increase would be a major headwind for gold.

However, Hansen also pointed out that rising margin calls, refinancing stress, and broader liquidity requirements could lead investors to raise cash, making gold's highly liquid market an obvious source of liquidity. This creates a paradox: higher yields may strengthen gold's longer-term investment case, while an acute liquidity squeeze could trigger selling and weigh on prices.

On the COMEX, gold futures were flat at $4,168 per ounce, while silver futures dropped 1% to $61 per ounce. On the Multi Commodity Exchange of India, December gold futures traded flat at Rs 148,600 per 10 grams, and December silver futures declined by 0.9% to Rs 225,500 per kg.