Gold retreats to near last week's bottom as 10-year yield surpasses 5.10%

Gold came under fresh selling pressure on Tuesday, with its price retreating toward the prior week's trough and raising the risk of another technical decline.

The bond market was again the primary factor. The yield on the 10-year Treasury note advanced to 5.15%, after jumping about 15 basis points on Monday in the wake of robust US economic data. A disappointing Treasury auction added to the pressure. This lifted yields to a level not seen since 2007, which is understandably weighing on gold.

Gold offers no yield. Therefore, a rising risk-free rate increases the opportunity cost of owning the metal. Consequently, expectations of a more aggressive Federal Reserve, potentially tightening policy further, have been heaping additional pressure on gold since last week.

Technically, the recent decline places gold at a notable level on the price chart.

Gold has fallen below the $4,300 area and again broken under its 100-day moving average. This brings the price to a test of the 61.8% Fibonacci retracement of the advance from July to September, which lies near $4,241. That level also matches last week's swing low. Therefore, it is the first important support level to watch.

A decisive break beneath that support could leave gold vulnerable to further losses, with little resistance ahead of the psychologically significant $4,000 level.

On the upside, buyers need to see gold recapture the $4,300 to $4,328 zone. That would be the initial sign of a reversal before any discussion of a move toward $4,400.

For now, the larger uncertainty is the direction of bond yields. That continues to be the dominant force across wider markets.

As long as the 10-year yield remains above 5% and keeps threatening new peaks, gold will struggle to generate upward momentum.