According to Kitco - Gold and silver prices are maintaining important support levels in the short term before the weekend holiday. Although the precious metals are still fluctuating in a relatively neutral range, some analysts believe that fluctuations in the bond market last week may be a sign that investors' concerns are changing.
Although long-term bond prices tend to close the week at a lower level than recent peaks, yields are still maintained at an alarmingly high level. The yield on 30-year US Treasury bonds is currently above 5%, while the yield on 10-year bonds ended the week above 4.5%.
Analysts believe that in the short term, rising bond yields are a major drag on gold and silver. Rising yields may force the US Federal Reserve (Fed) to raise interest rates by the end of this year, thereby increasing the opportunity cost when holding non-performing assets such as gold and silver.
However, analysts also noted that the boundary between rising yields due to inflation and the risk of bond crisis - a factor that could support precious metals as an asset preservation tool - is very fragile.
Mr. Naeem Aslam - Investment Director of Zaye Capital Markets - said that the risk of a bond crisis is increasing, even though the market has not really entered a "storm".
We are getting closer to that point, but not completely reaching the threshold. The big risk lies in the loss of long-term bond yield control. If 10-year and 30-year yields continue to rise chaotically, the market may begin to doubt whether government bonds are still safe haven assets or not," he said.
According to Mr. Aslam, the signal to watch is that if long-term yields continue to increase but gold stops falling, it shows that investors no longer see high yields as a reason to avoid gold, but rather see this as a reason to hold precious metals. At that time, the need to preserve assets may return strongly.
Mr. John Murillo - Business Director of international brokerage firm B2BROKER Group - also closely monitors the risk of bond crisis. However, he believes that for gold investors, the situation may still be difficult before improving.
He said that although gold is still seen as a hedging tool against inflation and geopolitical risks, this precious metal is under increasing pressure from expectations that the Fed will pursue a more "hawkish" stance.
According to Mr. Murillo, gold prices may face a short-term correction due to geopolitical tensions and slower gold buying rates by central banks, affecting market sentiment. However, the trend of central banks quietly shifting reserves from government bonds to precious metals will help gold have a solid support before strong sell-offs.
In the short term, Mr. Murillo believes that gold is at risk of falling to $4,000/ounce. However, in the long term, he expects the price to reach $10,000/ounce.
This view is based on growing concerns about persistent inflation due to the prolonged impact of the Middle East conflict, along with the weakening of the USD," he said.
However, not all experts believe that the bond crisis is approaching. Bond strategists at TD Securities believe that the upward momentum of long-term yields is in line with inflation expectations.
According to TD Securities, the market's adjustment of expectations for the Fed is the main driving force for interest rate increases. In addition, higher inflation expectations and still positive economic growth also contribute to pressure on yields.
Experts at TD Securities believe that the Fed currently does not want to raise interest rates, but the market can still continue to bet on the possibility of further tightening, causing short-term US Treasury bond yields to continue to rise.
In that context, commodity experts from TD Securities warned that gold prices could test the support zone around 4,350 USD/ounce.
