Gold (XAU) has surged to its highest level since April, with prospects for further gains as the often-overlooked factor of Treasury yield curve steepening gains momentum. This shift in the bond market could also provide a boost to bitcoin (BTC).
Over the past ten days, the price of gold has increased by more than 5% to $3,480 per ounce, inching closer to the record high of $3,499 set on April 22, according to TradingView data.
The rally coincides with a steepening U.S. Treasury yield curve, as the spread between 10-year and 2-year yields (10y2y) widened to 61 basis points – the highest since January 2022. Meanwhile, the gap between 30-year and 2-year yields reached 1.30%, the widest since November 2021.
This steepening has been driven largely by a faster decline in the 2-year yield, which fell 33 basis points to 3.62% in August, compared to a smaller 14-basis-point decline in the 10-year yield, now at 4.23%. In bond market terms, this is known as a “bull steepening,” where shorter-term bond prices rise more sharply (yields fall) than longer-term ones. ((Bond prices move in the opposite direction of yields.)
Ole Hansen, Head of Commodity Strategy at Saxo Bank, explained that this dynamic is positive for gold.
«For gold, lower front-end yields ease the opportunity cost of holding non-yielding assets. This shift is particularly relevant for real asset managers, many of whom have struggled—or in some cases been restricted—from allocating to gold, while U.S. funding costs were elevated,» Hansen said in an analysis note Thursday.
Hansen explained that the total holdings in bullion-backed ETFs declined by 800 tons between 2022 and 2024, as the Fed raised rates to combat inflation, which sent short-duration yields higher.
Bitcoin is often compared to gold as a store of value, and like gold, it is considered a non-yielding asset. Neither Bitcoin nor gold generates interest or dividends; their value is primarily driven by scarcity, demand, and market perception. So, the decline in the two-year yield could be considered a bullish development for BTC.
Meanwhile, the relative resilience of longer-duration yields is attributed to expectations of sticky inflation and other factors, which also support the bullish case in gold and BTC.
«The U.S. Treasury curve has unsurprisingly steepened: lower rates today risk inflaming inflation further ahead, which is bad news for bonds,» analysts at ING said in a note to clients Friday.
Hansen explained that much of the relative resilience in the 10-year yield stems from inflation breakevens, currently at around 2.45%, and the rest represents the real yield.
«[It] signals that investors are demanding greater compensation for fiscal risks and potential political interference with monetary policy. This environment typically supports gold as both an inflation hedge and a safeguard against policy credibility concerns,» Hansen noted.
The nominal yield is made up of two components: Firstly, the inflation breakeven, which reflects the market’s expectation for average inflation over the bond’s maturity. This portion of the yield compensates for the loss of purchasing power due to inflation. The second component is the real yield, which represents the additional compensation that purchasers demand above and beyond inflation.
Bull steepening is bearish for stocks
Historically, gold and gold miners have been among the best performers during prolonged periods of bull steepening in the yield curve, according to analysis by Advisor Perspectives. Conversely, stocks tend to underperform in these environments.
Overall, bitcoin finds itself in an intriguing position, given its dual nature as an emerging technology that often moves with the Nasdaq, while also sharing gold-like qualities as a store of value.
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