Gold Rises but Faces Pressure from Rising U.S. Treasury Yields

By Gina Lee

Gold prices experienced a rise on Thursday morning in Asia, recovering slightly after dropping to a seven-week low in the previous session. However, the continued increase in U.S. Treasury yields is still exerting downward pressure on the market.

As of 12:28 AM ET, gold was up 0.49%, trading at $1,731.35. This rebound comes after a decline to $1,720.49 on Wednesday, marking its lowest point since August 9. Meanwhile, benchmark Treasury yields also rose, maintaining levels above 1.5%, the highest seen since late June 2021.

DailyFX currency strategist Ilya Spivak noted that gold appears to be consolidating but may face another significant downturn. He attributes this to the Federal Reserve’s shift towards reducing asset purchases and a steeper interest rate hike cycle than the market had anticipated.

While there are potential risks that could push gold prices higher, such as disappointing economic data or the Evergrande debt crisis affecting other economies, Spivak believes these factors are unlikely to provide sustained support for gold prices. He warned that a drop below $1,700 could lead to testing the levels between $1,675 and $1,680.

At an ECB forum on Wednesday, several central bank heads, including U.S. Federal Reserve Chairman Jerome Powell and European Central Bank President Christine Lagarde, expressed cautious optimism about inflation, indicating their belief that it is likely to be temporary.

In the Asia-Pacific region, China released data showing that its September purchasing managers’ index (PMI) registered at a lower-than-expected 49.6. In contrast, the services PMI and the composite PMI figures were more favorable, coming in at 53.2 and 50, respectively.

In other precious metals, silver saw a slight increase of 0.2%, platinum rose by 0.6%, and palladium gained 0.7%.