Gold back in ‘danger zone’ as US dollar, treasury yields surge

Gold fell for a third day as a gauge of the US dollar hit a record and Treasury yields surged overnight amid expectations of further monetary tightening by the Federal Reserve.

Bullion has dropped below the $1 700 an ounce level as central banks globally raise interest rates to combat inflation, dulling the allure of the non-interest bearing asset.

A deluge of corporate debt offerings and a stronger-than-expected gauge of service-sector activity saw Treasury yields advance Tuesday. This helped buoy the greenback against almost all of its major developed-market counterparts, and spurred bets for another 75 basis points Fed hike.

“Gold is back in the danger zone as global bond yields are skyrocketing,” said Edward Moya, senior market analyst at Oanda Corp. “Central banks seem like they will be aggressive with front loading rate hikes right now. It could get ugly quickly if gold breaks below the $1 690 level as there isn’t much support until $1 650.”

Spot gold fell 0.3% to $1 697.44 an ounce as of 7:26 a.m. in London, after dropping 0.6% in the previous two days. The Bloomberg Dollar Spot Index hit an all-time high. Silver was little changed, while platinum and palladium declined.

Traders will also be monitoring the European Central Bank’s policy decision Thursday. Money markets scaled back rate-hike expectations amid mounting concerns about the health of the region’s economy.

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