Spot gold traded at $4,254.30 an ounce on Thursday as the 10-year Treasury yield pushed to 5.15%, its highest since July 2007. The selloff traces to a jump in real yields rather than inflation fears, and traders now watch the $4,225 to $4,235 band as the line between a pullback and a deeper break.
Real yields do the damage
Gold pays no coupon, so every basis point added to Treasury yields raises the cost of holding it instead of bonds. The 10-year Treasury yield reached 5.15% on Thursday, and the 30-year touched 5.446%, a level not seen since June 2004.
According to Treasury's daily real yield curve, the 10-year real yield climbed from 2.63% to 2.76% in a single session, accounting for 13 of the 15 basis points added to the nominal yield. Implied inflation compensation moved only 2 basis points. The trigger was growth data: the S&P Global composite PMI for September jumped to 58.4 from 56.0, the strongest expansion since July 2021, which leaves the Fed room to keep tightening.
A firm dollar adds a second headwind
The U.S. Dollar Index climbed to 100.80 on Wednesday, its highest since July 30, making each ounce of gold pricier for buyers outside the U.S. and denting demand from jewelry and bar markets in Asia. EUR/USD broke under 1.1390 on Thursday as the gap between U.S. and European rate hike expectations widened.
Fed funds futures now price a 75.3% chance of another hike in October and a 58.6% chance of a further move in December. The policy rate already sits at 3.75% to 4.00% after the September 16 hike, and officials don't expect inflation to return to the 2% target until 2029.
Central banks keep buying the dips
Despite the rate shock, the official sector keeps stepping in. The People's Bank of China added 20.2 tonnes to its reserves in August, extending its buying streak to 22 consecutive months, while the National Bank of Poland has acquired 90 tonnes so far in 2026. Global physically backed gold ETFs still hold a record 4,189 tonnes after taking in $18 billion in August, the second-largest monthly inflow on record.
That buying is why traders are watching the $4,225 to $4,235 zone, which combines the 61.8% retracement of the summer rally with the September 16 swing low. A daily close below it would open the path toward $4,098 and then the summer low near $3,935. A recovery above $4,315 would signal the selloff has run its course.
Source: Investing.com
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