- Spot Gold (XAU/USD) has a significant indirect correlation with the 10-year US Treasury yield since May 2023.
- A potential short-term pull-back in US 10-year Treasury yield below a 4.90% key medium-term resistance may offer a “relief mean reversion rebound” on spot Gold.
- Watch the key support of US$1,810 on spot Gold.
In the past two weeks, the price of spot Gold (XAU/USD) has tumbled swiftly by -6.90% from its 21 September 2023 high of US$1,947 to a seven-month low of US$1,813 printed on Thursday, 5 October.
The primary driver has been the rapidly rising longer-term US Treasury yields that increase the opportunity cost of holding gold due to its “zero-yielding asset” nature. The 10-year US Treasury yield, a benchmark for long-term interest rates has increased by 158 basis points from its May 2023 low to a recent high of 4.88% on Wednesday, 4 October.
Fig 1: Spot Gold (XAU/USD) correlation with 10-year US Treasury yield as of 6 Oct 2023 (Source: TradingView, click to enlarge chart)
Potential pull-back for US 10-year Treasury yield
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