Gold Up but Remains Pressured by Climbing U.S. Treasury Yields

Gold was up on Thursday morning in Asia, after tumbling to a seven-week trough during the previous session, but rising U.S. Treasury yields continued to apply pressure.

Gold futures gained 0.49% to $1,731.35 by 12:28 AM ET (4:28 AM GMT), clawing back some of its losses on Wednesday when it fell to $1,720.49, its lowest level since Aug. 9. Benchmark U.S. 10-year Treasury yields also climbed and held above 1.5%, a level not seen since late June 2021.

“Gold is consolidating before maybe another major leg lower,” DailyFX currency strategist Ilya Spivak told Reuters, pointing to the Fed’s move towards asset tapering and a steeper interest rate hike cycle than markets initially expected.

“While there are ample risks that could help gold break higher, like weaker economic data or the Evergrande debt crisis potentially spilling over into other economies, these are unlikely to provide lasting support.”

A break below $1,700 could see gold test the $1,675 to $1,680 level, said Spivak.

Central bank heads including U.S. Federal Reserve Chairman Jerome Powell and European Central Bank (ECB) President Christine Lagarde, alongside Bank of England and Bank of Japan Governors Andrew Bailey and Haruhiko Kuroda, spoke at an ECB forum on Wednesday. Although they are monitoring inflation, they were cautiously optimistic that the phenomenon will be temporary.

In Asia Pacific, China released data earlier in the day showed that September’s manufacturing purchasing managers index (PMI) was at a lower-than-expected 49.6. However, the non-manufacturing PMI and the Caixin manufacturing PMI were at a better-than-expected 53.2 and 50 respectively.

In other precious metals, silver edged up 0.2%, platinum gained 0.6% and palladium rose 0.7%.