Gold Price Surges Amidst US Yield Decline

Gold prices experienced a significant uptick on Tuesday, October 15, 2024, as the yield on US 10-year Treasury notes retreated. This decline, coupled with a weaker US Dollar, made gold more attractive to investors seeking a safe-haven asset.

The primary catalyst for gold’s surge was the decrease in US Treasury yields. When yields fall, the opportunity cost of holding non-interest-bearing assets like gold becomes less significant. This incentivizes investors to allocate more of their portfolios to precious metals.

Several factors contributed to the decline in US Treasury yields:

Economic Indicators: The New York Empire State Manufacturing Index, released on Tuesday, showed a significant contraction in manufacturing activity in the region. This suggests that the US economy may be slowing down, which could lead to lower interest rates.
Inflation Expectations: While the New York Fed’s Consumer Expectations Survey revealed a slight uptick in inflation expectations for the next three years, it remained relatively subdued. This suggests that the Federal Reserve may have more flexibility to cut interest rates in the future.
Geopolitical Tensions: Ongoing geopolitical tensions, such as the conflict between Israel and Iran, also contributed to the demand for gold as a safe-haven asset. Investors often turn to gold during times of uncertainty and geopolitical risk.
In addition to the decline in US Treasury yields, the weaker US Dollar also supported gold prices. A weaker dollar makes gold more affordable for investors holding other currencies, increasing demand for the precious metal.

Market participants are now closely watching upcoming US economic data, including retail sales, industrial production, and initial jobless claims. These data releases could provide further insights into the health of the US economy and influence the Federal Reserve’s monetary policy decisions.

Technical analysis suggests that the uptrend in gold prices remains intact. If gold can break above the October 4 high of $2,670, it could continue to climb towards its year-to-date high of $2,685. However, if gold falls below $2,650, it could face downward pressure, with potential support levels at $2,600 and the 50-day Simple Moving Average