How has gold price reacted to bond market turmoil?

On Monday, the price of gold kept falling as the bond market turbulence persisted. The XAU/USD pair fell to its lowest point since March 14th, 1,880. Its decrease from this year’s peak is greater than 9.3%. At the time of writing, the precious metal is selling for $ 1894.69 per ounce.

The US dollar is being dumped by China and Saudi Arabia, which has put tremendous pressure on gold prices in recent months even while issues in the bond market persisted. Bond yields, which follow prices in the opposite direction, increased to their highest point in more than a decade.

As investors anticipated that the Fed would keep raising interest rates, the yield on the 10-year Treasury shot up to 4.346%, the highest level since 2007. The yield on 30-year bonds increased to its highest level since 2012.

Notably, despite some significant economic news regarding the United States, the price of gold has been struggling. While the nation’s fiscal deficit is increasing, several significant purchasers of US debt are decreasing their holdings.

The second-largest US debt holder, China, has decreased its holdings to the lowest level in more than 14 years. Its current holdings of US debt are over $850 billion, which is less than its previous record of around $1.2 trillion.

Saudi Arabia is likewise selling off US Treasury bonds. In July, which was the third straight month, it sold bonds for more than $3 billion. It currently has $108 billion. These nations are currently transferring these cash to other assets, such as gold. The central banks of Turkey and India are two additional prominent gold buyers.

The US is causing governments more and more concern as global concerns rise. For instance, there are worries that the US would impose a finance freeze on them, as it did with Russia at the start of the conflict in Ukraine.

They are also alarmed by Fitch’s recent decision to downgrade the US credit rating from AAA to AA-. The US debt has increased significantly over the last few years, and many predict things will only get worse. All of these elements support gold, which is seen as a safe haven.

The daily chart reveals that the price of gold has experienced a significant sell-off recently. The price has already above the critical support level of $1,957, the peak from February 3. Additionally, it has fallen below the critical $1,892 support level and the significant 50-day moving average.