(Kitco News) - Despite the recent selling pressure, analysts note that the gold market is holding up remarkably well, given that bond yields have risen to a fresh 15-year high.
Overnight, the yield on U.S. 10-year bonds pushed to 4.36%, its highest level since late 2007. Analysts note that the rise in bond yields is negative for gold as it increases the precious metal’s opportunity costs as a non-yielding asset.
Some analysts have said that gold could benefit significantly if those rising bond yields indicate a crisis of confidence in U.S. debt. However, many analysts have noted that the weakness in U.S. bonds appears orderly and a natural reaction as the Federal Reserve is expected to maintain its aggressive interest rate hikes.
“Physical interest in Gold has kicked up considerably across various hubs at a time that fast money is running rather short,” she said. “Liquidity, or lack thereof, is compounding general August moves more so than in the past. It’s tough to convincingly read into short-term reactions in a month where volumes are light for any reliable signal, and vols across most asset classes are low. There‘s concerns over liquidity issues of the Treasury market – the MOVE index has already started to rear up.
Some analysts have said that although yields can move higher in the near-term, an end to the central bank’s tightening cycle should eventually cap them.
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