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Gold Prices Are Advancing Even Though US Treasury Yields Are Rising

Daniel Plainview

Updated: July 7, 2022

hold gold back
Editor’s Note:

EDITOR'S NOTE: Gold prices are advancing despite rising US Treasury yields. What’s going on, exactly? Could be a number of things, but it appears as if investors are taking a broader look at the global economy (for instance, the global impact of Australia’s interest-rate decision, or the war in Ukraine). Domestically, perhaps investors are getting a sense that inflation may render the returns of interest-bearing assets near-zero or negative. We won’t know until we get the next set of inflation numbers but it’s certainly feeling that way, especially if you factor in the psychological effects of eroding income levels and rising costs. Gold is currently hovering above a wide yet critical support range from $1,720 to $1,750 an ounce. Year to date, gold has outperformed the S&P, even in its downturn. What’s likely to produce a better return in the coming months: the yellow metal or the broader market? It’s a big question that many appear to be struggling with. But again, isn’t gold supposed to be a hedge-like allocation within a diversified portfolio? – Gold was up on Tuesday morning in Asia despite a rise in U.S. Treasury yields and a strengthening dollar.

Gold futures inched up 0.56% to $1,811.55 by 11:41 PM ET (0341 GMT). The dollar, which normally moves inversely to gold, inched up on Wednesday morning.

U.S. 10-year Treasury yields pushed past 2.95% after reopening from a holiday.

U.S. President Joe Biden may announce a rollback of some U.S. tariffs on Chinese consumer goods this week to counter inflation. Biden administration could also unveil a probe into industrial subsidies, which might lead to more duties in strategic areas like technology.

In Asia-Pacific, China’s services activity grew at the fastest rate in June in almost a year as COVID curbs eased and demand revived. China Caixin services purchasing managers' index (PMI) rose to 54.5 in June.

Ukrainian President Volodymyr Zelenskiy said that his armed forces were undeterred in their efforts to “break” Moscow’s will to pursue a nearly five-month war on Monday, while Russia’s Vladimir Putin hailed his military’s victory in the grueling battle of Luhansk.

Investors now are also monitoring Australia’s interest-rate decision, which is due later in the day.

In other precious metals, silver jumped 1.77%. Platinum fell 0.47% while palladium inched up 0.03%.

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