Gold Price Forecast: US Treasury Yield Slump Pushes Gold Above $4,500, Will Gold Keep Rising?

From a fundamental perspective, the core driver of the surge in gold prices lies in the sharp decline in long-term U.S. Treasury yields.

The global bond market faced a notable sell-off earlier this week, with the 30-year U.S. Treasury yield climbing near highs not seen since 2007. In response to the rapid rise in long-term interest rates, the U.S. Department of the Treasury announced it will double its long-term Treasury buyback program over the coming months to enhance bond market liquidity. Following the announcement, long-term U.S. Treasuries rebounded sharply, with the 30-year yield pulling back to around 5.19% and the 10-year Treasury yield dropping to near 4.64%.

The sharp drop in Treasury yields provided a significant boost to gold. Because gold pays no yield, falling Treasury yields reduce the opportunity cost of holding the metal; meanwhile, the U.S. dollar came under pressure and fell close to a two-and-a-half-month low, further driving inflows into gold. Affected by this, gold prices rose 4.35% on Wednesday, touching a high of $4,524.36, and broke out further during today's Asian session, reaching a high of $4,527.12.

However, after setting a new recent high today, gold failed to sustain its upward momentum and quickly pulled back to around $4,485. On one hand, clear profit-taking emerged above $4,500 following the rapid rally; on the other hand, the newly released minutes from the Fed's July meeting remained hawkish, curbing the market's appetite to chase gold higher.

The meeting minutes showed that Federal Reserve officials' concerns over inflation intensified at the July meeting. In addition to three officials directly supporting a 25-basis-point rate hike, more policymakers believed that if inflation remains persistently above the 2% target, further rate hikes might still be necessary in the future. This implies that the Fed has not entirely abandoned the possibility of another rate increase later this year.

However, compared to when the July meeting was held, the current U.S. economic environment has shifted. Subsequent data showed negative nonfarm payroll growth for July, while inflation metrics such as the CPI were relatively mild, significantly easing market fears of an immediate rate hike. Currently, the rate market prices in a 69.4% probability that the Fed will keep interest rates unchanged in September, with the likelihood of a rate hike falling to 30.6%. Therefore, despite the hawkish tone of the minutes, they have not reversed the bullish thesis for gold in the near term.

Source: CME Group

Looking ahead, market focus will shift to Fed Chair Kevin Warsh's speech at the Jackson Hole Economic Symposium. Investors will pay close attention to how Warsh assesses the recent cooling in employment, inflation, and rapid volatility in long-term U.S. Treasury yields. If he downplays the need for further rate hikes, Treasury yields could decline further, providing fresh momentum for gold's upward run; conversely, if Warsh continues to emphasize inflation risks and keeps the option of rate hikes on the table, gold could undergo a downward adjustment.

Gold Price Daily Chart, Source: TradingView

Looking at the daily chart, gold prices directly broke above $4,500 during Wednesday's surge, with the daily closing price holding firmly above $4,500. This indicates that the short-term bullish structure has further improved and market bullish momentum has significantly strengthened, suggesting that gold prices may continue to rise in the short term.

Currently, gold prices have risen to near the resistance level of $4,525. Meanwhile, this level is relatively close to the 144-day moving average, which may form a resistance confluence and cause an intraday pullback in gold prices. If gold prices can effectively break through the resistance of the 144-day moving average in the short term, further upside room will open up, with the potential to test the $4,650 resistance level, and further up, the $4,770 resistance level. A breakthrough above this level would open up upside room toward $4,890.

On the downside, the primary support area to watch below is the $4,450-$4,430 region. If gold prices fall below $4,430, they may pull back toward the $4,400 mark. If this level fails to hold, gold prices could experience a deeper pullback toward the $4,330 support level.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.