Gold up Most in 2 Months as U.S. Bond Yields, Dollar Crash

By Barani Krishnan

Investing.com -- The plunge in over-hyped U.S. bond yields and the dollar has arrived. And it hasn’t disappointed gold bulls, who saw their biggest one-day gain in two months.

Gold’s benchmark futures contract on New York’s Comex, December, settled Wednesday’s trade up $33.80, or 2.1%, at $1,670 per ounce. The last time a front-month contract in Comex gold gained that much or more was exactly two months ago — July 28 — when it rose 2.9%.

The spot price of bullion, which is more closely followed than futures by some traders, was up $31.18, or 1.9%, to $1,660.50 by 15:45 ET (19:45 GMT).

Gold jumped as the Dollar Index, which pits the U.S. currency against the euro and four other rivals, hovered at 112.5 — down 1.3% on the day for its sharpest tumble since the 1.45% drop on June 16.

The yield on the U.S. 10-Year Treasury note, meanwhile, tumbled to a near one-week low of 3.707 from a 14-year high of 4.01 earlier on Wednesday.

“This was somewhat expected and serves as a reminder that gold will do just fine once the global bond market selloff is truly over,” said Ed Moya, analyst at online trading platform OANDA.

“Gold was getting dangerously close to the $1,600 level as the dollar was surging to fresh records, but that trade might have hit an exhaustion point. Global recession fears will likely remain the theme for the rest of the year and that should limit how far global bond yields end up going. Gold’s two-year low might be the bottom, if not it should be very close to it.”

Despite Wednesday’s rebound, gold remained down some 9% on the year, with technical charts suggesting it wasn’t entirely out of the woods as bears could make a comeback at the higher $1,600 levels or beyond.

“For now, the bears might prefer to wait for a better positioning of their short bets,” said Sunil Kumar Dixit, chief technical strategist at SKCharting.com. “The 1,681 and $1,710 points are potential order blocks for bears.”