The S&P/ASX 200 Index (ASX: XJO) has slipped 0.1% from record all-time highs on Friday.
This follows a weak overnight performance on Wall Street with all three indices, the Nasdaq Composite (NASDAQ: .IXIC), S&P 500 Index (SP: .INX) and Dow Jones Industrial Average Index (DJX: .DJI) down between 0.07% and 1.03%.
Despite the slight pullback, ASX gold miners have taken a worse hit on Friday.
Large cap ASX gold miners including Northern Star Resources Ltd (ASX: NST), Evolution Mining Ltd (ASX: EVN) and Newcrest Mining Ltd (ASX: NCM) are currently down 4.10%, 3.20% and 1.73% respectively.
Mid-tier players such as Perseus Mining Ltd (ASX: PRU) and Ramelius Resources Ltd (ASX: RMS) are a little worse off, down 5.61% and 7.18% respectively, but Regis Resources Ltd (ASX: RRL) is faring better, down just 1.91%.
At the more speculative end of town, gold explorers have also taken a hit with popular names such as De Grey Mining Ltd (ASX: DEG) slumping 7.32% at the time of writing.
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Higher treasury yields smacks gold prices
US bond yields ticked upwards on Thursday night in response to better than expected labour market data. The United States reported a surge in private-sector employment in May, while initial jobless claim figures came in within expectations.
Benchmark US 10-year treasury yields rose about 4 basis points to 1.626%. 10-year treasury yields have been range bound between 1.5% to 1.7% since March this year. This follows its meteoric rise from lows of 0.50% in August last year to a peak of 1.75% in late March.
Coinciding with the uptick in treasury yields and positive labour market data, gold prices slumped about 2% overnight from US$1,900 to US$1,870.
Why do treasury yields matter?
There is an opportunity cost when it comes to holding gold. The yellow metal does not bear any yield, so a capital flow from gold to bonds can be expected when yields become sufficiently high.
For most of last year, the opposite was happening as 10-year yields plunged from 1.95% pre-COVID to lows of 0.50% by August 2020. In conjunction with the fall in yields, gold prices surged from around US$1,650 to a peak of over US$2,060 on 6 August 2020.
Gold could be at its crossroads, with factors such as a weak US dollar and high inflation propping up prices, while a potential breakout of yields could send prices further south.
