Gold’s price has hit a two-week high amid ongoing turmoil in the bond market and growing concerns over the U.S. government’s debt.
Spot %Gold prices rose 0.8% to $3,340.53 U.S., the highest level since May 9 of this year.
The rise in the price of bullion has coincided with a continued drop in the value of the U.S. dollar, which is near a two-week low.
Investors and central banks are buying gold after there was weak demand for 20-year U.S. Treasury bonds in a recent auction, raising concerns about poor interest in American assets.
There are also rising fears of stagflation in the U.S. economy, which is when inflation rises even as the economy stagnates.
All the worries have led U.S. Treasury yields to spike, with the 10-year bond jumping to 4.60% and the 30-year Treasury bond yield topping 5.14%.
Rising bond yields occur when investors sell U.S. Treasuries. There are fears that foreign investors are offloading American bonds as they lose faith in the government and economic outlook.
The U.S. Treasury Department saw soft demand for a $16 billion U.S. sale of 20-year bonds on May 21, which has made bond traders nervous.
The weak demand comes days after %Moodys (NYSE: $MCO) lowered its U.S. credit rating, dropping it from the highest AAA level and citing escalating debt concerns.
Gold is widely viewed as a store of value and treated as a safe haven investment in times of economic and geopolitical turmoil.
The bond market upheaval also comes as the U.S. House of Representatives voted to advance U.S. President Donald Trump’s sweeping tax-cut and spending bill, legislation that is likely to raise the U.S. government’s debt even higher.
The price of gold has risen 21% in the last six months, outpacing stocks and most other assets.
