Gold prices have dropped to their lowest level since March, as they continue to move away from record-high levels reached just five months ago. This decline is attributed to surging Treasury yields and a stronger dollar, which are negatively impacting the precious metal. The sudden attractiveness of fixed income investments has also affected the short-term outlook for gold. December gold futures settled at $1,847.20 an ounce on Monday, marking the lowest finish for the most-active contract since March 9.
The decrease in gold prices can be linked to rising U.S. government bond yields and a reassessment of expectations for higher long-term interest rates. This situation is reminiscent of the last time gold traded at a low, which was over six months ago due to the U.S. regional banking crisis. The drop in gold prices comes after a period of rising prices earlier this year, with gold reaching its second-highest settlement on record in May. The current trend indicates that gold prices are approaching a “death cross,” which suggests a bearish trend in the market.
Senior market analysts predict that gold will continue to decline if the 10-year Treasury yield surpasses 5%. The 10-year Treasury yield has increased to 4.674% on Monday, following the U.S. government’s avoidance of a weekend shutdown. However, some analysts believe that gold is oversold in the short term, leaving room for a potential corrective bounce. Despite the current decline, there is optimism that gold will have its moment in the sun once the peak in the U.S. dollar is reached.
