The price of gold has fallen to a two-year low, falling below the $1,670 mark.
Expectations that the Fed will continue to aggressively tighten monetary policy have weighed on gold prices.
Upbeat US retail sales continue to show the strength of the US economy.
Gold fell below the psychological level of $1,700 an ounce to a fresh two-year low of $1,665.30 as expectations that the Federal Reserve would continue to tighten monetary policy triggered a surge in US Treasury yields. The dollar tracked Treasury yields but gave up earlier gains. At the time of writing, gold/USD is trading around $1,666 per Troy ounce.
Higher Treasury yields sent gold tumbling
Treasury yields surged on expectations that the Fed could raise rates by 75-100 basis points. The US two-year Treasury yield, which is most sensitive to rate rises, peaked at 3.84 per cent, while the 10-year benchmark remained at 3.437 per cent, up 3 basis points. Notably, the yield curve inverted further, widening the spread between 2-year and 10-year notes to -0 to 403 percent, as market participants anticipated that aggressive Fed action could derail the U.S. economy and send it into recession.
U.S. retail sales unexpectedly rose in August after falling a month earlier, rising 0.3 percent and beating expectations of -0.1 percent, the Commerce Department reported.
Meanwhile, the Labor Department released economic data showing 213,000 new claims for unemployment benefits in the week ended Sept. 10, down from the previous week and below estimates of 227,000.
The New York and Philadelphia Fed manufacturing indexes showed mixed results. The New York Fed manufacturing index improved but remained in contractionary territory, while the Philadelphia Fed index fell into contractionary territory after reporting a rebound in August.