Gold edges higher as US bond yields stabilise after surge

On Wednesday, August 19, gold experienced a modest increase as a sell-off in US bonds subsided, alleviating pressure on the precious metal following its most significant decline in nearly a month on the previous Tuesday. The precious metal climbed as much as 0.6 percent, trading above US$4,360 an ounce, after slipping almost 2 percent the day before.

Treasury yields stabilized following a sharp drop that pushed 30-year note yields to their highest level in almost two decades on Tuesday. Higher borrowing costs typically have a negative impact on gold, which does not generate interest.

Gold has rebounded in recent weeks, trading around US$4,400 an ounce, driven by renewed investor demand and central bank purchases, particularly from China. A recent Bank of America fund manager survey indicated that the percentage of respondents who considered gold undervalued reached its highest level since March 2023. However, the possibility of a peace deal between the United States and Iran dwindling may hinder further gains.

The expiration of the memorandum of understanding between the two nations without any plans for extension has also contributed to the uncertainty.

Despite the recent surge in inflows into precious metals easing, Ryan McKay, an analyst from TD Securities, noted that there may not be renewed selling pressure. The upcoming clues on the Federal Reserve's interest rate path will arrive later on Wednesday with the release of the minutes from its July policy meeting, followed by chairman Kevin Warsh's speech at the Fed's annual Jackson Hole symposium next week.

Spot gold was 0.5 percent higher at US$4,357.07 an ounce at 11:34 am Singapore time, while silver fell 0.6 percent to US$62.99 an ounce. Platinum and palladium also edged higher. The Bloomberg Dollar Spot Index, which gauges the US currency, declined 0.1 percent.