Gold declines as bond yields stay elevated despite oil drop

Its weakness may persist in the near term as investors weigh the Fed’s policy path, strategists say

Published Tue, Oct 20, 2026 · 08:36 AM

Higher rates are generally a headwind for gold as it pays no interest. PHOTO: REUTERS

[NEW YORK] Gold slipped as bond yields stayed elevated despite falling energy prices, with traders assessing the outlook for the US Federal Reserve’s interest rate path.

Bullion fell as much as 0.7 per cent to US$4,136.71 an ounce during US trading.

Treasury yields and inflation-adjusted rates pushed higher, even as oil fell from a five-month high after a blistering rally fuelled by a flare-up in fighting across the Middle East.

The strength in yields also came from a sell-off in French bonds following a weekend of violent unrest. Higher rates are generally a headwind for gold as it pays no interest.

Gold’s move lower also stemmed from thin liquidity on Monday (Oct 19), according to Nicky Shiels, head of metals strategy at MKS PAMP.

There’s “just very little subscription and so it reverts to the pattern of being bid during Asian hours and well-offered during New York hours”, Shiels said.

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Bullion’s weakness may persist in the near term as investors continue to assess the direction of the Fed’s policy path, TD Securities commodity strategists led by Bart Melek said in a note.

They pointed out that hedge funds and money managers slashed their bullish bets on Comex gold for the week ended Oct 13, with their short positions being built at a faster pace than long positions.

Bullion has traded in a tight range in October as traders calibrate the US central bank’s next move. They priced in a 17 per cent chance of a quarter-point hike at the Fed’s meeting next week after comments by chairman Kevin Warsh were interpreted as supporting the case to keep rates steady in October.