Gold prices slipped to $4,290 on Thursday, extending a pullback from August's highs as investors rotated toward yielding assets amid a sharp rise in US Treasury yields and climbing crude oil prices. The precious metal has now fallen roughly 8.6% from its peak earlier this year, with the 10-year Treasury yield touching 5.1%, a level not seen in over two decades.
Rising Yields Pressure Gold
The latest leg lower came after stronger-than-expected US economic data. S&P Global's flash PMI readings for September showed manufacturing at 57, up from 53.9 in August and well above the 53.6 consensus. Services and composite PMIs also came in hot at 58.7 and 58.4, respectively. These figures suggest the US economy remains resilient despite elevated inflation, leading traders to price in a higher likelihood of another Federal Reserve rate hike this year. According to prediction markets like Polymarket and Kalshi, the odds of a hike have jumped to over 80%.
Gold, which pays no yield, tends to underperform when bond yields rise, as investors shift capital into interest-bearing instruments. The 10-year Treasury's surge to 5.1% has made short-term government bonds particularly attractive, accelerating the outflow from gold.
Oil Rally Adds to Inflation Concerns
Meanwhile, crude oil prices continued their upward march, with Brent crude climbing to $102.5 per barrel and West Texas Intermediate (WTI) reaching $92. The rally, driven by persistent supply concerns, has pushed US gasoline prices to an average of $4.47 per gallon, while diesel prices have hit a record $6.52, according to AAA. President Trump is reportedly considering a ban on US diesel exports to curb domestic prices, though analysts note that such a move could backfire by disrupting global supply chains and ultimately raising costs.
The combination of rising energy costs and firm economic data has reignited inflation fears, further supporting the case for tighter monetary policy. This environment is unfavorable for gold, which is often seen as a hedge against inflation but struggles when real yields climb.
ETF Outflows Signal Waning Demand
Adding to the bearish sentiment, the SPDR Gold ETF, the largest gold-backed exchange-traded fund, saw outflows of over $230 million on September 21. Declining inflows into gold ETFs typically reflect reduced investor appetite for the metal, reinforcing the current downtrend.
Technical Outlook Points Lower
From a technical perspective, gold's daily chart shows a clear bearish pattern. The metal has broken below its 50-day exponential moving average (EMA), and the Relative Strength Index (RSI) has fallen below the neutral 50 level, indicating that sellers are in control. However, the RSI has not yet reached oversold territory, suggesting there may be room for further downside.
The most likely scenario is a continued decline toward the ascending trendline that has supported prices since late June, with the next target around $4,200. A move above the key resistance level of $4,390 would invalidate the bearish outlook and could signal a reversal.
Investors will be closely watching upcoming economic data and Federal Reserve communications for clues on the path of interest rates, which will likely dictate gold's near-term direction.
This article is for informational purposes only and does not constitute financial advice.
