Welcome to October and the grand finale of 2026. In Munich, the Wiesn will keep celebrating until Sunday, and then this year’s Oktoberfest will be history again. Whether fairground attractions such as the “high striker” (known in German as “Hau den Lukas”), where participants swing a sledgehammer, usually with a hard-plastic head, at a spring-loaded button, still exist today is not known to the author of these lines. In the financial markets, the bond markets played the role of the sledgehammer in recent days.
Bond markets: yields at multiyear highs
As in my last market commentary, new yield highs can be reported again this week. For example, yesterday the yield on ten-year US Treasuries rose above 5.30 percent for the first time since 2002. The 5.65 percent on 30-year bonds was also last seen on the scoreboard in 2002. Euro-area bond yields could not escape this upward trend either: They, too, climbed steeply. Just now, as I write these lines, the yield on 30-year UK government bonds also rose above the 6 percent mark for the first time since 1998.
Rising yields: headwinds for gold
Let’s keep it short: Sharply rising yields mostly mean significant headwinds for gold prices. After all, gold pays neither interest nor dividends. Government bonds, like gold, are considered a “safe haven,” but additionally offer investors a fixed interest rate. The rise in US Treasury yields also increases the appeal of US dollar investments. As a result, the US dollar appreciated, while the euro fell to its lowest level against the US dollar since the start of the year.
Gold price: pullback, recovery, renewed pressure
It should therefore come as no surprise that gold prices came under pressure recently. On Thursday morning last week, they were still trading at around US$4,285 per ounce. On Friday, they first rose to US$4,315 per ounce and ended the week at about US$4,290 per ounce. At the start of the week, however, with the rapid rise in yields, prices fell sharply: On Monday, they depreciated to as low as US$4,111 per ounce. Despite further rising yields, they recovered to US$4,220 per ounce by yesterday afternoon after US inflation data came in lower than the market consensus had expected. The renewed sharp rise in yields this morning and the further appreciation of the US dollar then sent the gold price back down to US$4,160 per ounce at present.
Weaker euro supports Xetra-Gold
The Xetra-Gold® price was at least somewhat supported by the weaker euro against the US dollar. During regular trading hours, it initially rose from €121.00 per gram last Thursday morning to about €121.70 per gram on Friday. On Monday, it slipped to this week’s low so far of €116.45 per gram, recovered to €119.25 per gram yesterday, and stood at €118.40 per gram at the time of writing.
Outlook: bond markets and US labor market in focus
Bond markets are likely to remain in focus. As long as yields do not fall sustainably, gold prices are likely to struggle. However, the US labor market report expected tomorrow could provide new impetus in one direction or the other. Although inflation data currently take center stage, many traders and analysts continue to watch the condition of the US labor market closely. It, too, is likely to play an important role in the Fed’s future monetary policy.
I wish all readers a restful weekend.