Gold: Price holds despite higher yields – Commerzbank

Commerzbank's Carsten Fritsch highlights that gold has remained around USD 4,400 per ounce despite a rise in US Treasury yields nearing late-July levels. He speculates that the market may lack confidence in the Federal Reserve's capacity to raise interest rates enough to fight inflation, or fear fiscal risks such as mounting government debt.

This lack of faith could be boosting gold's value. The gold price has stayed near USD 4,400 per troy ounce, contradicting a surge in oil prices and US bond yields. The yield on 10-year US Treasuries has reached 4.74%, almost back to the end-of-July level, while 30-year Treasuries' yield exceeded 5.3% for the first time since 2007.

Despite this, real interest rates have returned to end-of-July levels. Fed Funds futures' interest rate expectations have increased slightly, but they remain much lower than at the end of July. One interest rate increase is anticipated by the end of the year. The yield rise may not be due to anticipated interest rate hikes but other factors.

These could include doubts about the Fed's sufficient rate hikes to control inflation and fiscal risks linked to growing government debt, which may hinder significant interest rate increases. Both explanations favor gold. The FXStreet Insights Team, comprising journalists who curate market observations from respected experts, notes that GBP/USD weakened on Tuesday, falling towards 1.3500 amid bearish sentiment due to UK ILO Unemployment Rate staying steady at 4.9% and Employment Change at 83K, contrasting with earlier forecasts.

Weak UK labor data and Middle East tensions' risk-averse atmosphere also impact the pair. EUR/USD also struggles to gain momentum, trading below 1.1600 even after positive Eurozone and German economic sentiment data. The US Dollar benefits from a risk-averse market due to ongoing Middle East tensions, making it challenging for the currency pair to move north.

Gold has dipped below the $4,400 mark in the European session's first half, breaking a two-day winning streak as the US Dollar becomes stronger. Inflation risks from higher oil prices support the need for at least one Federal Reserve interest rate hike in 2026. Cryptocurrency prices are generally correcting, with Bitcoin nearing $64,000 and Ethereum weakening amid narrow-range consolidation.

Ripple trades under $1.00, pressured by falling technical indicators. US Treasury yields have been climbing throughout the week, reaching a 2007 high of 5.33% for the 30-year Treasury bond at its peak on Monday. Concerns over the increasing US fiscal deficit and doubts about the Federal Reserve's Independence are exerting pressure on US Government Bonds.