Gold extended its decline in Asian trading, reaching its weakest level since August amid rising US Treasury yields and a surge in oil prices, intensifying inflation concerns and dampening the metal’s appeal as an inflation hedge.
Gold extended its slide in early Asian trading on Tuesday, falling to around $4,125 an ounce after a sharp overnight drop that sent the metal to its weakest level since 5 August. The pullback has been driven by a rising US Treasury yield backdrop and growing conviction that the Federal Reserve may keep policy tighter for longer, reducing the appeal of an asset that does not pay interest.
The move lower has also tracked a firming in oil prices, which has revived inflation concerns across markets. Higher energy costs can feed through into broader price pressures, and that has complicated gold’s usual role as an inflation hedge. Tim Waterer, chief market analyst at KCM Trade, said the combination of expensive bonds and stronger crude has remained a drag on bullion, adding that oil’s rise on mixed signals about supply has kept inflation firmly in focus for investors.
Investors are now looking ahead to this week’s US Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred inflation gauge, as well as labour-market data for fresh clues on the policy outlook. Deutsche Bank said gold came under renewed pressure last week as both real and nominal yields climbed, underlining how sensitive the metal remains to rate expectations. If upcoming data point to softer inflation or a weaker jobs market, that could ease pressure on the dollar and offer some support to bullion.
Technically, the near-term picture remains soft. FXStreet’s analysis shows gold trading below its 100-day simple moving average and under the mid-point of the Bollinger Bands, a sign that momentum remains fragile. The relative strength index is hovering just above oversold territory, suggesting the market is stretched but not yet showing a convincing reversal. Initial resistance is seen near $4,190, with stronger barriers around $4,300 and $4,335. A recovery above $4,480 would be needed to signal that the current downside bias is easing.
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