Gold Stalls, Bond Market Crisis Looms

By Staff, Agencies

Gold is trading around $4,493 an ounce, down over 16% from its January peak of $5,595, struggling to stay above $4,500 as rising bond yields and a stronger dollar weigh on its safe-haven appeal.

The US-“Israeli” war on Iran has closed the Strait of Hormuz, pushing oil above $100 a barrel and fueling global inflation, which drives bond yields to multi-decade highs—keeping gold under pressure.

Ole Hansen, head of commodity strategy at Saxo Bank, noted that rising energy prices boost inflation, push government bond yields higher, and strengthen the US dollar, creating a tough environment for gold.

The result is a paradox. A war that would ordinarily send investors scrambling for safe-haven assets is actually working against the very asset traditionally viewed as the ultimate safe haven.

Gold is under pressure because it pays no yield, making high-yielding 30-year US Treasuries—now over 5%—a more attractive, low-risk option.

Market analyst Fawad Razaqzada warns bond markets are nearing a tipping point, as rising Treasury issuance meets growing demand for higher returns amid persistent inflation.

With the US budget deficit around $1.8 trillion, the recent 63-basis-point rise in 10-year yields adds nearly $250 billion in annual borrowing costs, intensifying fiscal strain.

The same bond yields causing gold pain today carry the seeds of gold's next major rally.

Hansen, speaking to Kitco News, explained that "a continued rise in yields may well end up being positive for gold given the fiscal debt worries it raises." He reasons that if yields keep climbing, investors may eventually stop seeing Treasuries as a reliable safe haven and start treating US debt itself as the problem, at which point gold becomes the obvious refuge.

"For gold to regain upside momentum," Hansen said, "the market needs to see some easing in oil-driven inflation concerns, or renewed evidence that growth risks are beginning to outweigh inflation fears."