Gold experienced its sharpest sell-off in three months due to a surge in Treasury yields
The price of gold has fallen to early-August levels / Photo: Shutterstock.com / Volodymyr TVERDOKHLIB
December gold futures fell 4% on September 28—the sharpest one-day drop since June 10, according to Dow Jones Market Data cited by MarketWatch. The metal’s closing price was the lowest since early August.
The ongoing sell-off in U.S. Treasury bonds is putting pressure on gold: the yield on benchmark 10-year bonds reached its highest level since June 2007 on Monday, according to Reuters. The yield on 2-year notes rose to its highest level in 2.5 years, according to MarketWatch.
In such a situation, a precious metal that does not generate interest income becomes less attractive to investors, the publication explains.
Higher borrowing costs also make the dollar more attractive, and since gold is denominated in U.S. dollars, the dollar’s strength makes it more expensive for foreign buyers, which could reduce demand, according to MarketWatch. On Monday, the index tracking the dollar’s performance against a basket of other currencies rose 0.2%.
At the same time, demand for gold weakened in China, the world’s largest consumer of the metal. This occurred ahead of the holiday week marking the founding of the People’s Republic of China, which begins on October 1. By the end of last week, the premium on the Chinese market relative to the global benchmark had fallen to zero, Reuters notes. However, prices may be supported by purchases from central banks and rising demand in India ahead of the traditional Festival of Lights and the wedding season.
This article was AI-translated and verified by a human editor
