Gold Tumbles as Hawkish Fed Repricing Sends Yields Soaring

The gold market has come under significant pressure in recent trading sessions due to a strong inverse relationship between gold and macro drivers. The US dollar index (DXY) and nominal US yields have risen, pushing gold prices lower.

Over the past five sessions, gold's correlation with the DXY has hit -0.93, one of the strongest inverse relationships seen in decades. Similarly, gold's correlation with US 2-year, 5-year, and 10-year yields has tightened to around -0.98, -0.99, and -0.97 respectively.

The hawkish Federal Reserve repricing has been particularly extreme, with the US 2-year yield rising by 55 basis points over the past 20 sessions, placing it in the 98th percentile since 1988.

Gold bears are eyeing a break of key September support at $4,220, which has acted as both support and resistance this year. A clean break through this level could set up further downside targets of $4,165 and $4,115.