Gold Prices Rise 5% to $3,480 as Treasury Yield Curve Steepens
Gold has reached its highest level since April, rising over 5% to $3,480 per ounce. This increase coincides with a steepening U.S. Treasury yield curve, where the spread between 10-year and 2-year yields widened to 61 basis points, the highest since January 2022.
- The gap between 30-year and 2-year yields is at 1.30%, the widest since November 2021.
- The 2-year yield fell by 33 basis points to 3.62%, while the 10-year yield decreased by 14 basis points to 4.23%.
- This "bull steepening" indicates that shorter-term bond prices are rising more sharply than longer-term ones.
- Lower front-end yields reduce the opportunity cost for holding non-yielding assets like gold.
- Total holdings in bullion-backed ETFs declined by 800 tons from 2022 to 2024 due to rising rates.
- Bitcoin, similar to gold, is viewed as a store of value and may benefit from the decline in the two-year yield.
The resilience of longer-duration yields reflects expectations of persistent inflation, which supports the cases for both gold and Bitcoin. Analysts suggest that lower rates today could lead to increased inflation in the future, adversely affecting bonds.
Bull steepening is bearish for stocks
Historically, gold and gold miners perform well during bull steepening periods, while stocks tend to underperform. Bitcoin's position is noteworthy as it aligns with both emerging technology trends and traditional store-of-value characteristics.