Why Gold Strengthens as Yields Fall

OANDA Senior Market Analyst Kelvin Wong notes that the sharp decline in inflation-adjusted 10-year US Treasury yields has bolstered gold prices. The benchmark 10-year yield has fallen to its lowest level in three months.

With lower opportunity costs for holding non-yielding gold, the metal remains attractive. Although the US dollar index rose about 0.6% during the month and hawkish Fed expectations put some pressure on gold, the drop in real yields has largely offset this, helping gold maintain its resilience.

Diplomatic Talks Keep Uncertainty Alive

The US–Iran nuclear program negotiations in Geneva remain a key focus for markets. While mediator Oman reported progress, no final agreement has been reached. Continued military activity in the region and the absence of a binding text preventing potential intervention keep the geopolitical risk premium elevated. This explains why safe-haven demand remains strong, with investors favoring gold and other precious metals in times of uncertainty.

Strong Performance Across Precious Metals in February

Spot gold traded sideways on Friday at $5,187 per ounce, while April futures rose 0.2% to $5,201.40. February has seen gold approach its seventh consecutive monthly gain.

Other precious metals are also participating in this rally:

• Silver rose 1.6% to $89.79 per ounce, moving toward a monthly gain of roughly 6.1%.

• Platinum increased 3.9% to $2,260.09 per ounce.

• Palladium gained 1.7% to $1,805.24 per ounce.

This indicates that the rally is not limited to gold but extends across a broader basket of precious metals.

Why Prices Are Rising

The main drivers behind gold’s rise are clear. Declining US Treasury yields steer investors toward non-yielding assets, while tensions between the US and Iran, along with global trade uncertainties, boost safe-haven demand.

Despite occasional pressure from a stronger dollar and expectations of Fed tightening, the macroeconomic environment currently favors precious metals. Upcoming US policy announcements and Treasury market movements will determine the short-term direction of precious metals prices.

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