Golden Investment Opportunities and Risks in the 10-Year U.S. Treasury Yield Fluctuations

The U.S. bond market has experienced recent intense volatility, with the 10-year U.S. Treasury yield dropping sharply from 4.2% to 4.13%. This reflects market concerns about the U.S. economic outlook and expectations of a dovish shift in Federal Reserve monetary policy. As a traditional safe-haven asset, gold faces a complex interplay of opportunities and risks during this cycle of declining 10-year Treasury yields. The upcoming January non-farm payroll data will be a key trigger in determining the future trend of risk assets and gold investment opportunities.

Non-Farm Payrolls Approaching: Signs of Weakening Labor Market Already Evident

On February 10, the market’s so-called “horrible data” was released: U.S. December retail sales remained flat month-over-month, failing to meet the expected 0.4% growth and significantly below the previous 0.6%. This result has raised deep concerns within the industry about consumer momentum. Morgan Asset Management’s Chief Global Strategist, David Kelly, pointed out that, aside from possible tax refunds or tariff rebates, the growth foundation of the real economy is beginning to weaken.

The signs of a weakening labor market are even more apparent. U.S. December JOLTS job openings fell to 6.542 million, a more than five-year low, well below the market expectation of 7.25 million. The New York Fed’s consumer expectations survey released on February 9 shows that, although January consumers’ concerns about short-term inflation and employment prospects have eased, overall confidence indicators remain relatively low from a historical perspective. In the era of AI, the employment model of “low hiring, low firing” is exacerbating the K-shaped economic divide in the U.S., further threatening future consumer spending.

Downward Trend in 10-Year Treasury Yields Reflects Economic Outlook Concerns

The downward trajectory of the 10-year Treasury yield clearly reflects market expectations of a policy shift by the Federal Reserve. Recent money market bets show that expectations for three rate cuts this year have surpassed the previous forecast of two cuts just a week ago, with easing policy expectations intensifying. This shift is driven by soft economic data.

This week’s upcoming release of the U.S. January non-farm payroll data is particularly critical. If the data confirms a weak labor market, especially with rising unemployment, risk assets including U.S. stocks could face correction pressures. In such an environment, gold, as a traditional safe-haven asset, would see significantly reduced downside risk and could benefit from safe-haven buying.

Real Rates and Gold: Finding Investment Logic in Negative Correlation

From a long-term perspective, U.S. real interest rates and gold prices show a clear negative correlation. Short-term economic uncertainty exerts downward pressure on nominal rates, but further declines in the 10-year Treasury yield may be constrained by multiple factors.

According to official U.S. Treasury data, China’s holdings of U.S. Treasuries have fallen to $682.6 billion, down sharply from the peak of $1.32 trillion in January 2013, highlighting the ongoing process of de-dollarization globally. Meanwhile, excess capital expenditure by tech giants also poses inflationary pressures. If the Fed resumes large-scale rate cuts to stabilize the economy, inflation risks could re-emerge, potentially pushing U.S. real rates higher and supporting gold prices.

Gold ETF Boom Amid Global De-dollarization

Gold’s volatility surged sharply at the end of January, with high fluctuations significantly reducing investors’ expectations for “stable returns.” Market forecasts suggest that in the second quarter, gold will be increasingly viewed as a commodity trading asset, likely entering a prolonged consolidation phase with reduced volatility.

However, from a full-year or longer-term perspective, ongoing global de-dollarization and long-term geopolitical risks indicate that gold will remain a key focus. According to the latest World Gold Council report, global gold ETF inflows recently reached a record $18.7 billion, pushing total assets under management in gold ETFs to a record $669 billion. This substantial capital inflow demonstrates that institutional investors and global funds remain confident in gold as a store of value.

Some analysts believe that the $5,500 per ounce market cap of gold, comparable to the scale of U.S. Treasuries, suggests that the long-term trend of gold will ultimately depend on whether the U.S. can rebuild and maintain global trust and confidence in U.S. debt.

Technical Outlook for Gold: Early Signs of Consolidation in Q2

From the monthly chart perspective, the past two months show long upper and lower shadows, indicating significant market disagreement between bulls and bears. Market participants expect gold to potentially hit a cyclical low in the second quarter, but the overall pattern will gradually shift from high volatility to a low-volatility consolidation phase.

Investors should focus on the $4,600 support level and closely monitor key periods in early April and early June, which could serve as critical turning points for gold’s Q2 performance. Guided by the 10-year Treasury yield, the investment logic for gold will become clearer, and market participants should reassess their gold allocations within the context of economic data and interest rate policies.