Gold prices have risen to a new record high, topping $2,680, which analysts attributed to movements in government bond markets.
In short, inflation expectations on both sides of the Atlantic have eased this week, leading to rising expectations for interest rate cuts and therefore putting pressure on bond yields, which makes gold more attractive to some investors.
US Treasuries have rallied this week, having sold off following the US Federal Reserve rate cut decision last month, which drove the 10-year to a yield of 4.12%, the highest since late July.
A rally yesterday dragged the yield back to circa 4.01% and today the US 10-year yield has fallen to just over 4.0%.
ETF investors have been "rotating into gold as US Treasury yields slide", said metals analyst John Meyer at SP Angel.
Explaining the moves in bond markets, the decline in oil prices this week has meant "investors became more relaxed about inflationary pressures which have moved increasingly onto the radar over recent weeks", said macro strategist Jim Reid at Deutsche Bank.
In turn, investors dialled up the likelihood of rate cuts over the months ahead, with the expected rate priced in by markets for the Fed’s June 2025 meeting dipping slightly to 3.62%.
"With rate cut expectations moving higher again, that led to a sovereign bond rally on both sides of the Atlantic," said Reid.
In the US, long-end bonds saw the sharpest decline in the past couple of day, with 30-year yields down in their sharpest decline since the volatility shock at the start of August, followed by the 10 year Treasury and then the 2-year.
Meyer said US retail sales, due tomorrow, "will be of primary focus to the US Treasury market, with a miss potentially providing the next leg higher for gold".