Gold Crashes to Lowest Level Since August Amidst Escalating Tensions and Surging Yields

Gold prices plummeted to their lowest level since early August as the US dollar and Treasury yields surged higher. The decline comes amidst renewed tensions between the US and Iran, with President Trump rejecting an Iranian proposal that would have reopened the Strait of Hormuz within seven days.

The strong inverse relationship between gold and the US dollar index has been particularly pronounced in recent sessions, with a correlation of -0.93 over the past five days. The same holds true for nominal Treasury yields, which have seen their correlation with gold tighten to -0.98 over the same period.

Notably, the rise in US 2-year yields ranks among the largest 1% of comparable four-week moves since 1988, placing it at the 98th percentile. This extreme move has put significant pressure on gold prices, which have struggled to hold up despite the velocity of the yield curve.

From a technical perspective, gold is currently testing support levels around $4,235 and $4,220, with a break below these levels potentially opening up further downside targets.