Gold falls as traders lean into higher for longer Fed rates
Money markets are pricing three more Fed rate hikes over the next year, and long-term Treasury yields have hit their highest since 2004.
Published
Chart: GLD, daily closes since Sep 2023
Gold fell as investors positioned for a Federal Reserve that holds rates higher for longer.
Money markets are pricing three additional Fed rate hikes over the next year. Long-term Treasury yields have climbed to their highest levels since 2004, giving investors an alternative to gold that pays a yield.
The hawkish tone has built over recent weeks. Cleveland Fed president Beth Hammack has said underlying inflation remains likely above target and that the biggest risk is an inflationary mindset taking hold. Fed policymaker Jeffrey Schmid has called US government debt "extreme." New York Fed president John Williams and Swiss National Bank chairman Martin Schlegel have both hardened the case for further rate increases.
Gold's slide reflects a consensus that has been building rather than a new shift in the outlook for Fed policy. With hikes and elevated yields already priced in by markets, the fall in the metal looks like confirmation of existing positioning rather than a fresh bearish signal for investors holding the metal.