Gold Tumbles as US Yields and Dollar Resume Ascent

Gold prices have fallen to their lowest level since early August as the US dollar and Treasury yields continue to rise. The gold price has come under pressure in early Asian trade on Monday, with the yellow metal falling below $4,300.

The move follows Donald Trump's rejection of an Iranian proposal that would have reopened the Strait of Hormuz within seven days and brought an end to fighting. The US dollar index (DXY) and nominal US yields have maintained a strong inverse relationship recently, which has put pressure on gold prices.

Over the past five sessions, gold's correlation with the DXY has hit -0.93, while its correlation with nominal Treasury yields has tightened further to around -0.98. This means that gold and US yields have moved almost perfectly in opposite directions over the past week.

The hawkish Federal Reserve repricing has also contributed to the rise in US yields, with the 2-year yield rising by around 55 basis points over the past 20 sessions. This is one of the largest four-week moves since 1988, and it has placed significant pressure on gold prices.