Gold Prices Drop Significantly As US Bond Yields Rise

On Thursday (28/9/2023), gold prices hit a seven-month low, sending it down a glistening road that was previously uncharted. Rising US government bond yields have caused four consecutive losses. The consensus of the market is that US interest rates will stay relatively high for some time.

In December, the Comex New York Exchange’s most actively traded gold contract dropped $12.30, or 0.65%, to $1,878.60 per ounce. The range for the session was $1,896.80 to $1,874.50.

On Tuesday (9/26) gold futures dropped 0.87 percent, on Wednesday (27/9) they dropped 1.51 percent, and on Monday (0/46) they dropped $9.

Bond yields put a damper on gold prices

As Ed Moya, an analyst at OANDA, put it, “The bond market has just killed hopes of a gold prices rebound in the short term.” Gold should be at its lowest point, but rising bond yields worry metal merchants that the decline may continue, he explained. Gold suffers when the yield curve of government bonds is brought into focus by moves in the long-term bond market.

Yields on US government bonds, especially 10-year bonds, hit a 16-year high on Thursday (28/9/2023). This increase was fueled by investors’ anticipation of future rate hikes from the Federal Reserve. Bond selling pressure maintained despite a decline in the US currency from monthly highs.

Moya predicted that “technical selling toward $1,870” would be possible now that gold has dropped below $1,900. It’s possible that gold prices might drop to $1,800 if global bond yields rise in spite of inflation forecasts.

Some positive economic news

Gold prices was able to prevent a deeper plunge thanks to economic data released on Thursday (28/9/2023), despite the challenging conditions. The US Department of Labor reports that the number of people filing for unemployment benefits has increased by 2,000, to 204,000, from 202,000 the previous week.

The actual Gross Domestic Product grew by 2.1% in the second quarter of 2023, according to data from the US Department of Commerce. The first quarter had a 2.2% increase in real GDP.

Pending house sales in the United States fell by 7.1% in August, according to the National Association of Realtors (NAR). Pending home sales expected to fall by 1% in August, according to economists.

Investors are waiting for the Federal Reserve to issue the PCE Price Index for Personal Consumption Expenditures (PCE) on Friday.

Different precious metals behave in different ways

Gold prices which mean precious metals were highly unpredictable. The price of one ounce of silver is currently at $22.741. Its increase of 1.70 cents (or 0.7%) over its price in November. And then, platinum saw a month-over-month price gain of $18.80, or 2.10 percent, to $915.10 per ounce in the month of January.