Gold Falls Toward $4,140 With the 10-Year Treasury Yield Above 5.1 Percent

What this means

Gold pays no interest, so a 10-year Treasury yield above 5 percent raises the cost of holding it, and futures traders positioned in dollars sell when yields rise. Gold has fallen only modestly, though, which points to a buyer base the desk associates with reserve diversification away from dollar assets, a buyer that is less sensitive to yields. Bitcoin is trading with AI and technology risk, as weekend liquidations and ETF outflows show, and not with gold. That supports the view that bitcoin behaves as a liquidity asset under stress. Markets already price a December hike. A hike that is fully expected tends to hurt gold less than the uncertainty that preceded it. In 2022, gold lost about a fifth of its value while the Federal Reserve raised interest rates. It recovered once investors began anticipating the end of the hiking cycle, before rates had actually fallen. The desk's read is that gold will stay under pressure but hold most of its gains through the December meeting, and that bitcoin will keep following the Nasdaq rather than metals over the coming weeks. If Thursday's jobless claims and Friday's purchasing managers' surveys come in soft, traders will scale back hike pricing and gold will be the first to benefit. If bitcoin rallies while technology stocks fall, the desk's read on bitcoin is wrong.