Gold Falls as Bond Yields Surge to Decades-High Levels and Oil Extends Gains

Gold declined as Treasury yields surged to their highest levels in decades, increasing the opportunity cost of holding non-yielding bullion. The U.S. 30-year Treasury yield reached its highest level since mid-2007, while long-term borrowing costs in the United States, Japan and Germany also climbed significantly.

Oil prices continued to rise for a third consecutive session as tensions between the United States and Iran escalated. Iran said the Strait of Hormuz would remain closed until Washington met conditions for an interim agreement, while prospects for a U.S.-Iran peace deal appeared increasingly uncertain.

Higher energy prices could reinforce inflationary pressures and make central banks more cautious about lowering interest rates. This created additional pressure on gold despite recent economic data pointing toward weaker U.S. growth.

Recent U.S. data showed unexpected job losses in July, cooler inflation and weak retail sales, which had previously reduced expectations for a September Federal Reserve rate hike. Markets were pricing in a 33% probability of a September rate increase, down from 51.2% a month earlier, according to the CME FedWatch Tool.

Analysts cited by Reuters described the decline as potentially part of a consolidation period rather than a change in the broader bullish trend, though sustained increases in Treasury yields and energy prices could continue to create headwinds for bullion.