Gold (XAU/USD) attracts sellers on Tuesday, snapping a two-day winning streak as a firmer US Dollar (USD) and rising long-term US Treasury yields weigh on the precious metal.
At the time of writing, XAU/USD trades around $4,393, down 0.50% on the day
The benchmark 10-year US Treasury yield has climbed toward 4.75%, while the 30-year yield has risen above 5.30%, its highest level since 2007. The rise in yields is part of a broader global bond sell-off driven by inflation and fiscal concerns, with long-term borrowing costs in the United Kingdom, Germany and Japan also climbing to multi-decade highs. Higher yields increase the opportunity cost of holding non-yielding assets such as Gold.
Strategists at Brown Brothers Harriman highlight that the latest leg higher in crude is feeding through to rates and broader risk sentiment, noting that “the renewed upswing in crude Oil price is pushing bond yields higher and worsening already fragile fiscal dynamics.” However, BBH cautions that “the risk of further dovish Fed repricing will keep USD rebounds shallow and short-lived,” suggesting that any Dollar strength is likely to remain constrained. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.65 after rebounding from 99.30 on Monday, its weakest level since June 5. Energy-driven inflation concerns stay at the forefront as the standoff between the United States (US) and Iran over the Strait of Hormuz drags on.