Gold drops 3% as higher bond yields weigh on prices

Highlights

Gold futures fell 3.04%, while spot gold lost 3.06%.
Higher bond yields increased pressure on gold prices.
Silver and major mining stocks also fell sharply.

December COMEX gold futures were down 3.04% at $4,189.90, according to the latest market data provided, while spot gold fell 3.06% to $4,155.08. The declines came as rising global bond yields reduced demand for non-interest-bearing precious metals, according to CNBC.

Higher yields challenge gold

The selloff comes as U.S. Treasury yields remain elevated. The 10-year yield was around 5.2% on Monday, increasing the relative appeal of interest-bearing government debt compared with gold, which produces no income. A stronger U.S. dollar has added another source of pressure, with the dollar index reaching its highest level in about two months.

Oil prices are also complicating the outlook. Higher energy costs can feed into inflation across the economy, strengthening the case for restrictive monetary policy. Markets were pricing roughly a two-thirds chance of another Fed rate increase in October after the central bank raised its benchmark rate by 25 basis points earlier this month.

Gold had already been under pressure before Monday’s drop, losing more than 2% over the previous week as yields and the dollar climbed.

Silver and mining stocks retreat

The weakness spread across precious metals. Silver futures dropped about 5.1% to $61.52 an ounce, while spot silver declined roughly 4.9% to $61.11, according to the market figures provided.

Mining shares also came under pressure before the U.S. market open. Sibanye Stillwater fell 7.92%, Harmony Gold Mining lost 7.49%, and Newmont declined 4.72%. Silvercorp Metals, Endeavour Silver, and Hecla Mining were also sharply lower.

The moves underline how quickly higher yields can affect companies whose earnings are tied closely to precious metal prices.

Rates become the next test for bullion

Gold now faces competing forces. Elevated inflation and geopolitical uncertainty can support demand for bullion as a portfolio diversifier, while higher interest rates and bond yields increase the opportunity cost of holding it.

Longer-term demand has not disappeared. Global central banks bought a record 289 metric tons of gold in the second quarter, according to figures cited in the material provided. That reserve demand offers a different source of support from short-term investment flows.

For now, however, interest rates are dominating trading. With December futures near $4,190 and spot gold around $4,155, the metal has moved decisively lower as investors reassess the path for U.S. monetary policy.

We also reported South Korean yields surged as investors priced in further rate hikes.

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