Gold Trades Near ‘Danger Zone’ as Dollar, Treasury Yields Surge

Gold steadied after a two-day decline as traders eyed the soaring dollar and a surge in Treasury yields amid expectations of further monetary tightening by the Federal Reserve.

Bullion had dropped below $1,700 an ounce 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-point 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.”