Gold Tops $1,700 on Easing US Dollar, Falling Treasury Yields

Gold futures are building on their gains on Tuesday amid a retreating US dollar and falling Treasury yields. The yellow metal has been gaining momentum and joining the broader rally in the financial markets. But can gold sustain these gains, or is this a bear market bounce?

November gold futures surged $19.10, or 1.12%, to $1,721.10 per ounce at 13:15 GMT on Tuesday on the COMEX division of the New York Mercantile Exchange. Gold has been on a tear this week, kick off the fourth quarter with a 5% boost.

Silver, the sister commodity to gold, has also recorded significant gains on Tuesday. November silver futures soared $0.461, or 2.24%, to $21.035 per ounce. The white metal exited its bear market and cut its year-to-date losses in half to under 10%.

The two main factors for gold this week have been a weakening greenback and sliding bond yields.

The US Dollar Index (DXY), which gauges the greenback against a basket of currencies, extended its losses on Tuesday, falling 0.71% to below 111.00. Despite the recent decline, the buck has spiked nearly 16% year-to-date.

A weaker buck is good for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.

After hitting their best levels in 15 years, Treasury yields have been sliding, with the benchmark ten-year yield down 5.6 basis points to 3.595%. The one-year bill shed 2.2 basis points to 3.951%, while the 30-year bond dropped 4.2 basis points to 3.665%. The recession-indicating spread between the two- and ten-year yields remained at around -45 basis points.

Lower yields are bullish for gold prices since they can reduce the opportunity cost of holding non-yielding bullion.

Other factors gold investors are monitoring now are the geopolitical situation in Eastern Europe, central bank monetary policy, and even higher crude oil prices.

In other metal commodities, November copper futures added $0.0155, or 0.45%, to $3.426 per pound. November platinum futures added $25.70, or 2.84%, to $925.70 an ounce. November palladium futures soared $92.80, or 4.16%, to $2,325.00 per ounce.

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