In spite of the prevailing selling pressure, experts note that the gold market is displaying impressive resilience. This is particularly poignant considering the surge in bond yields to a new high, one that hasn’t been witnessed in the last 15 years. Overnight, the yield on U.S. 10-year bonds surged to 4.36%, marking a peak since the latter part of 2007.
Nicky Shiels, the metals strategist at MKS PAMP, pointed out that the disconnection in correlation between gold and bonds might stem from the subdued market volatility, coinciding with increased interest in gold.
“Interest in gold has kicked up considerably across various hubs at a time that fast money is running rather short,” she said. “Liquidity, or lack thereof, is compounding general August moves more so than in the past”.
Other analysts highlight that gold will sustain its advantages due to the growing sentiment that the Federal Reserve has finished its cycle of interest rate hikes. As per the data from the CME FedWatch Tool, there is an 85% probability that the central bank will maintain its current rates next month. Additionally, there is a 50/50 chance of another rate increase before the year concludes.
Ole Hansen, the chief of commodity strategy at Saxo Bank, suggested that the gold market might be garnering support because there’s still a lot of uncertainty in financial markets.
“Despite these major headwinds, not least surging real yields, gold is showing signs of stabilising with the recent bid being supported by a softer dollar and rising silver prices amid higher industrial metal prices on continued speculation China will have to do more stimulus,” Hansen said in a note on Tuesday.
The yellow metal maintains its robust position, highlighting its stability as a valuable asset and a secure store of wealth.
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