Solid Gold Futures – The price of gold (XAU/USD) weakened to around US$4,120 per troy ounce during European trading on Tuesday (October 20). The pressure stems from a recovery in US Treasury yields and rising oil prices, both of which diminish the appeal of gold—a non-yielding asset.
The 10-year US Treasury yield is hovering around 5.13%, following a 1.2% increase during Monday’s trading session. Although yields dipped slightly in the most recent session, they remain at elevated levels, acting as a headwind for gold by offering investors more attractive, yield-bearing alternatives in the form of US government bonds.
The market is also closely monitoring the third-quarter earnings season for major US "hyperscaler" companies. Meta is set to be one of the first big tech firms to report its quarterly performance this Wednesday, with Microsoft, Amazon, and Google expected to follow next week.
Goldman Sachs estimates that five major AI-focused hyperscalers could increase their combined capital expenditure to approximately US$1.2 trillion next year. Should such substantial spending bolster expectations for economic growth and financing demand, US Treasury yields could climb further, exerting additional pressure on gold.
Meanwhile, oil prices have risen by nearly 15% over the past two weeks, climbing from a low of approximately US$86.32 per barrel. WTI crude is currently trading around US$98.45 per barrel, with geopolitical risk premiums remaining high due to the ongoing conflict in the Middle East and concerns regarding potential disruptions to energy transit routes.
Tensions have escalated following reports that Iran might extend disruptions to the Bab el-Mandeb Strait and the Suez Canal, while also preparing retaliatory measures in the event of new attacks by the US or Israel. The combination of high US yields and rising oil prices continues to weigh on gold in the short term, even as geopolitical risks provide some underlying support for the metal as a safe-haven asset. (srh)