Falling Real Yields Cut Gold's Opportunity Cost Despite Uneven Demand - Crux Investor

AI desk brief

Falling U.S. real yields have lowered gold’s opportunity cost: the 10-year TIPS yield slipped from 2.80% on Oct. 19 to 2.66% on Oct. 23, while the 10-year nominal Treasury yield eased from 5.15% to 5.00%. Market-implied odds of an October Fed hike fell from about 70% to below 10% over the past month, and the LBMA afternoon gold benchmark still dropped 4.2% to roughly $4,013/oz in the week to Oct. 23, showing that lower yields alone have not been enough to support prices.

Fund flows remain mixed. WGC said gold ETFs drew $31bn in Q3, but provisional weekly data showed 13.1 tonnes of North American outflows versus 4.3 tonnes of European inflows, while CFTC managed-money net-long gold futures fell from 345.5 tonnes on Oct. 13 to 338.1 tonnes on Oct. 20. The piece also highlights improving mine output at several producers — including Mineros, Integra, TRX Gold, Serabi and West Red Lake — and says Sept. PCE inflation and Q3 U.S. GDP due Oct. 29 could move Treasury yields and gold’s relative appeal further.