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Gold Slumps to $4,130 as US Yields Hit Multi-Year Highs

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Gold sank near 4% to $4,130 on Monday as US 10-year yields hit a post-2007 high and the dollar firmed. Analyst Praveen Singh says rallies are selling chances.

Gold prices are facing severe downside pressure, and any bounce should be treated as a chance to sell, according to Praveen Singh, Head of Currencies and Commodities at Mirae Asset ShareKhan. The metal slid to $4,130 on Monday night, carrying a daily loss of close to 4%, after touching $4,111 earlier in the session - its weakest level since August 5.

The latest drop extends a run of losses. In the week that ended September 25, spot gold shed 2% to close at $4,286, weighed down by climbing US Treasury yields, a stronger dollar and firm oil prices. Singh links the current weakness to a sharp jump in real yields, a firmer greenback, strong US economic figures and a Federal Reserve that has stayed hawkish since its latest policy meeting.

Much of the selling was tied to the standoff between Washington and Tehran over the Strait of Hormuz. US President Donald Trump turned down Iran's proposal for a seven-day window that would have paved the way toward a phased agreement to reopen the waterway. Gold pared some losses after CNN reported that Trump was willing to consider sanctions relief for Iran on nuclear matters, but the lack of firm detail kept buyers cautious.

Iranian officials played down the odds of a breakthrough, saying a deal with the United States was unlikely before the November midterm elections and that an escalation after November 3 was highly probable. Qatari mediators were expected to meet with both sides on Monday or Tuesday, and Trump indicated talks could restart during the week.

Yields and the dollar squeeze the metal

The move in the bond market was the main driver behind gold's decline. Two-year Treasury yields spiked to a fresh cycle high of 4.95% on September 28 - the highest since May 30, 2024 - before easing to 4.93%, still up 1.64% on the day. Ten-year yields reached 5.27%, a level last seen in the middle of 2007, and hovered around 5.25%. Thirty-year yields climbed more than 1% to 5.56%, the highest since May 2024.

The US Dollar Index added to the pressure, trading 0.20% higher at 101.15 as yields pushed up. Over the week ending September 25 the index rose 0.7% and settled at 100.97 on Friday, its strongest weekly finish since July 24.

Rate expectations have swung firmly hawkish. Markets now price a 68% chance that the Fed raises rates at its October 28 meeting, and traders see the central bank tightening twice by January 2027 and close to four times over a year. Monday's sole US release, the Dallas Fed manufacturing activity index for September, came in at 9.8, beating the 7.8 estimate but down from a prior reading of 11.60.

Oil steady, ETF demand holds firm

Crude oil recovered from Friday's 2.13% fall, rising on Monday amid uncertainty over Hormuz before giving back intraday gains on the CNN report. Brent futures traded around $104.77, little changed, after an intraday peak of $108.83; the contract had closed the prior week at $104.45, up 0.6%. Saudi Arabia has restored most flows through its East-West pipeline, which was hit by drone attacks earlier in the month. About 3.5 million barrels per day now move through the line, against a nameplate capacity of 7 mbpd, of which 5 mbpd is earmarked for export.

Despite the price slide, investor demand for gold-backed funds has stayed resilient. Total known global ETF holdings have climbed to 100.80 million ounces, up 58 tonnes so far this year and well above the cycle low of 96.16 million ounces reached on July 20. Holdings sit just 3.74 tonnes below the cycle peak of 100.92 million ounces recorded before the start of the Iran conflict.

Speculators, however, have turned more cautious. CFTC data for the week ending September 22 showed money managers cutting bullish gold bets by 5,726 contracts to 131,334 lots, the least optimistic stance in eight weeks. Long-only positions dropped 6,530 lots to 139,307, while short-only bets fell 804 lots to 7,973 - the lowest in roughly 20 months.

Elsewhere, Chinese President Xi Jinping's three-day state visit to the United States wrapped up on September 25 with little progress on artificial intelligence, geopolitics or technology. The two countries agreed to extend their trade truce by two months to January 10, 2027, and to cut tariffs on about $30 billion of goods each way. China's industrial profits rose 4.2% year-on-year in August, a sharp slowdown from July's 11.2% gain.

With gold having broken below the key support band of $4,185 to $4,200, Singh warns the metal remains vulnerable to further losses. A packed data calendar lies ahead, including US consumer confidence and JOLTS job openings, ADP employment and the PCE price index, ISM manufacturing and the September nonfarm payrolls report due October 2.

gold price outlook, gold price prediction, US Treasury yields, US Dollar Index, Praveen Singh Mirae Asset ShareKhan, Federal Reserve rate hike, Strait of Hormuz, gold ETF holdings

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