U.S. bond yields rise, gold faces testing at key resistance level

Technical Deadlock Becomes Apparent

Gold prices are currently stuck in a technical deadlock, entering the fourth phase of consolidation since the upward trend began in February 2024. The key resistance zone of $4200-$4220 has become a short-term breakthrough obstacle, with the market warning that continued failure to hold could trigger a downward test towards the $4000 level. The formation of this situation is closely related to broader macroeconomic changes.

Bond Yield Environment Changes

Subtle shifts have appeared in recent weekly data. The Federal Reserve’s preferred inflation indicator—the US September core PCE annual growth rate—fell back to 2.8%, easing from 2.9% the previous month. This has led the market to infer that tariff impacts on prices may be a one-time disturbance. Consumer confidence indicators also released positive signals, with the December University of Michigan Consumer Sentiment Index rising from 51 in November to 53.3, reaching a five-month high.

Traders are betting that next week’s Federal Reserve meeting has an 87% chance of cutting interest rates, with expectations of two more rate cuts next year, bringing the final rate range to 3.00%-3.25%. However, this market optimism has not led to a mild development in the bond market—paradoxically, while rate cut expectations heat up, US bond yields have continued to rise to 4.15%.

Global Interest Rate Levels Rise Together

This is not unique to the United States. Japan’s 10-year government bond yield has touched 1.97%, and Germany’s 10-year government bond yield has risen to 2.81%. Bond yields in major developed countries are rising in unison.

In response, JPMorgan’s Global Rates Strategy team believes that the current Fed’s intention to cut rates aims to sustain economic expansion rather than end the growth cycle. This actually reduces recession risk expectations and limits the space for yields to decline. PGIM Fixed Income Chief Investment Strategist Robert Tipp interprets this as the end of the abnormal low-interest-rate era following the global financial crisis—markets are returning to pre-crisis normal interest rates.

Dual Pressures Facing Gold

The rise in US bond yields carries multiple implications. On one hand, high interest rates directly undermine the attractiveness of non-yielding assets, putting pressure on gold and other non-yielding assets. On the other hand, if rising rates signal systemic risk, investors tend to adopt aggressive de-risking actions—selling all risk assets, including gold.

Economist Henrik Zeberg warns that gold’s record-breaking rally may be facing a rapid reversal, as this precious metal is on the brink of a significant downturn. When US bond yields are high, the repeated resistance of gold at the $4200 level has become a market focus—if it cannot break through, the risk of a subsequent dip toward the $4000 level warrants cautious attention from investors.