Gold Prices Hit Weekly Low as Treasury Yields Surge

Gold prices declined to a one-week low of $4,271.16 per ounce on Thursday, falling from an earlier stable position near $4,291. The downward trend followed a surge in the US dollar to a two-month high and US 10-year Treasury yields hitting a 20-year peak of 5.15%.

Market pressure is driven by expectations that the Federal Reserve System will maintain a hawkish stance. While the central bank previously announced rate increases, investors now anticipate a second consecutive hike in late October and a 56% probability of a 50-basis-point hike in December. These projections are fueled by US business activity reaching a five-year high and mounting inflation pressures.

Geopolitical volatility further complicated the market. Early optimism regarding diplomacy between the United States and Iran to end their war initially lowered oil prices, but subsequent failed talks caused energy costs to rise by approximately 1%. This spike in oil prices is expected to exacerbate inflation, potentially forcing the Federal Reserve to raise rates beyond current projections.

Analyst Fawad Razaqzada noted that gold typically declines when bond yields rise due to the increased opportunity cost of holding zero-yielding assets. He suggested gold could drop toward $4,235 or as low as $4,000 if support levels break, though a reversal could occur if investors lose confidence in the central bank's ability to control inflation.