Rising Treasury yields are increasing the holding costs of gold, limiting its returns, and this continues to weigh on gold prices. The future of gold depends on developments in the bond market. Market analyst James Hyerczyk says yields above 4.631% could lead to further declines. The analyst assesses the current state of the gold market and its technical outlook.
Rising Treasury Yields Put Pressure on Gold Prices
According to information obtained from Kriptokoin.com, the US Dollar Index (DXY) and 10-year Treasury yields continued to rise. This situation put gold prices under increasing pressure since October 1. After the initial rise in early November, gold struggled to maintain its upward movement and encountered strong resistance around $2,726.30. These developments reflect market dynamics due to the effect of increasing yields and a strong dollar.
The yield on the 10-year Treasury note (US10Y) has risen sharply from 3.599% in early October to reach 4.631% in late December. The move higher suggests that inflation concerns are continuing and expectations of a Fed rate cut are waning. Higher yields are putting downward pressure on gold prices by increasing the opportunity cost of holding gold. Treasury yields are currently at 4.573%, with support at 4.493%. Analysts say a break above 4.631% would reinforce gold’s downtrend.
The U.S. Dollar Index rose to 108.541 from 100.157 in early October, tracking Treasury yields. The DXY is moving toward 109.534, having broken through a critical resistance level at 107.587. The stronger dollar is making gold more expensive for international buyers, limiting its upside potential. A stronger dollar could continue to weigh on gold’s performance in the near term.
Gold Prices Remain Below Key Resistance Level
Gold price movements reflect efforts to break out of key resistance levels. After reaching $2,790.17 in late October, gold fell to $2,536.85 in mid-November. Since then, gold has traded in a narrow range between $2,536.85 and $2,721.42. The 50-day moving average ($2,661.29) also acts as a ceiling for the price. The 200-day moving average provides critical support at $2,485.95. A break below this level would increase downside risks.
Gold continues to consolidate below the 50-day moving average at $2,661.29, a key resistance level from mid-December. Upside momentum will remain limited until gold can firmly break above this level. Current resistance is near $2,630.51, which represents the upper limit of price action. If $2,661.29 is broken, gold could move toward $2,693.40 and then $2,726.30.
On the downside, gold’s initial support is at $2,583.91. A break below this level could open the door for further declines to the November lows of $2,536.85. If the sell-off accelerates, the 200-day moving average at $2,485.95 would be the next significant support level.
Outlook: Will Gold Rise or Fall Further?
With Treasury yields rising and the dollar holding strong, gold is expected to remain under pressure. If 10-year yields rise above 4.631% or the dollar breaks above 109.534, gold could fall further. However, if yields ease and the dollar pulls back, gold could regain strength. In this scenario, gold could test $2,661.29 and potentially $2,726.30. For now, unless there are clear signs that yields are falling or the dollar is weakening, gold’s outlook remains bearish. Gold’s performance is closely tied to bond market developments and currency market movements. Therefore, these factors are of great importance to investors.