Gold News: Are Elevated Treasury Yields Signaling More Gold Weakness?

Gold Prices Plunge Over 4% in a Week. What’s Driving the Decline?

Gold prices endured their sharpest weekly drop in over three years, closing at $2,563.22, down 4.52% or $121.23. Persistent pressure from a surging U.S. dollar, rising Treasury yields, and shifting Federal Reserve policy expectations led the sell-off. Here’s a detailed look at the key drivers.

Are Rising Treasury Yields Undermining Gold’s Appeal?

U.S. Treasury yields surged last week, with the 10-year yield climbing to 4.505%, up from 4.298% earlier in the week. This rise, fueled by expectations of higher-for-longer interest rates, increased the opportunity cost of holding gold. Federal Reserve Chair Jerome Powell’s remarks reaffirming the absence of urgency to cut rates further amplified this sentiment, dampening gold’s allure as a non-yielding asset.

How Did the Dollar Reach a One-Year High?

The U.S. dollar soared to a one-year high at 107.064, dealing a heavy blow to gold prices. Bolstered by stronger-than-expected economic data, such as October retail sales rising 0.4% and revised September figures, the dollar’s strength reduced gold’s appeal among international buyers. With the dollar maintaining dominance, gold lost its footing as a hedge against economic uncertainty.

Is Economic Data Shaping Fed Policy Expectations?

Inflation data showed core CPI at 3.3%, firmly above the Federal Reserve’s 2% target. This prompted a shift in rate-cut expectations, with the probability of a December reduction falling to 59%, down from 83% earlier in the week. Gold, which benefits from a low-rate environment, faced additional selling pressure as traders adjusted to the potential for prolonged rate stability.

Can Technical Support Levels Prevent Further Losses?

Technically, gold’s weekly close just above $2,533.76 keeps this critical support level in play. A failure to hold above it could lead to an accelerated decline toward the 50% retracement level at $2,387.23. Resistance levels are noted at $2,571.68 and $2,631.04, with last week’s high at $2,686.17 and a low of $2,536.85​.

What’s the Market Outlook for Gold?

The short-term outlook remains bearish. Sustained dollar strength and elevated yields are likely to keep prices under pressure. A break below $2,533.76 could open the door to further losses. However, stabilization at current levels might spark a technical rebound over $2,571.68. Traders will closely watch upcoming Fed commentary and economic data for clearer direction.