New york: Gold prices experienced a significant decline of approximately 2% on Tuesday, driven by the surge in US Treasury yields, which has increased the opportunity cost of holding non-yielding assets. The precious metal's spot price fell to around $4,357 per ounce by 1240GMT, marking its lowest point since August 19 and extending its losses after previously dropping below $4,400 earlier in the session.
According to Anadolu Agency, silver faced an even steeper decline, falling 2.8% to $64.65 per ounce, with both platinum and palladium also trading lower. This selloff in precious metals coincided with US Treasury yields reaching their highest levels since January 2025. The rise in yields has been fueled by concerns over increasing energy prices and escalating tensions in the Middle East, which could potentially drive inflation higher.
Higher bond yields typically exert downward pressure on gold and silver, as these metals do not offer interest income, making yield-bearing assets more appealing in comparison. The expectations of tighter monetary policy were further reinforced by remarks from Federal Reserve Chair Kevin Warsh during the Jackson Hole symposium last week. Warsh indicated that the central bank would need to take action if there was a lack of confidence that inflation was sustainably returning to the Fed's 2% target.
The CME FedWatch Tool indicates that money markets are currently pricing in a 66% probability that the Federal Reserve will raise interest rates at its meeting later this month. Investors are keenly awaiting upcoming US labor-market indicators for additional insights into the economy's strength and the central bank's policy direction. The ADP private employment report is scheduled for release on Wednesday, followed by the closely monitored nonfarm payrolls report on Friday. Stronger-than-expected employment data could bolster expectations of a rate hike, exerting further pressure on precious metals, whereas signs of labor-market weakness could decrease the likelihood of policy tightening.