Gold rally faces test as yields climb
Gold’s two-week advance faced resistance on Tuesday as rising US Treasury yields and firmer oil prices challenged a recovery that has carried bullion back towards $4,400 an ounce.
Spot gold slipped about 0.4% to $4,397 an ounce during August 18 trading, after gaining roughly 0.9% on Monday. The metal finished the week ended August 14 near $4,376, up about 0.7%, extending its weekly winning run to two. US gold futures for December delivery were also lower, trading around $4,453 an ounce.
The immediate outlook remains finely balanced. Gold has recovered sharply from levels near $4,000 earlier this month, helped by a weaker dollar, softer US economic data and diminishing expectations that the Federal Reserve will raise interest rates again at its September meeting. Those forces remain supportive, but higher bond yields and the renewed rise in crude oil are limiting the scope for an uninterrupted rally.
The 10-year Treasury yield has moved higher as investors reassess inflation risks linked to escalating Middle East tensions and stronger energy prices. Higher yields normally weigh on bullion because gold pays no interest, increasing the relative attraction of government debt. Oil above $90 a barrel has complicated the picture by raising the possibility that persistent energy costs could keep inflation elevated and restrict the Federal Reserve’s ability to adopt a softer policy stance.
Traders are consequently focusing on the Federal Reserve’s July meeting minutes, due on Wednesday, for clues about how policymakers view the balance between slowing economic activity and inflation. The Fed kept its benchmark rate at 3.50%-3.75% at that meeting, although three officials favoured an increase. Weaker July employment figures, subdued consumer inflation and softer retail sales have since reduced expectations of another immediate tightening move. Markets now assign roughly a 65% probability to rates being left unchanged in September.
The dollar has also provided a significant tailwind. It has traded near multi-month lows against several major currencies as expectations for further US rate increases have faded. A cheaper dollar makes bullion less expensive for buyers using other currencies and has helped gold recover about 9% during August.
Technical conditions suggest that the rally could continue, but traders are approaching important resistance. Immediate support is emerging around $4,380, with a break below that zone potentially exposing $4,350 and then the $4,300 region. On the upside, sustained trading above $4,420-$4,450 would strengthen the case for another move towards the closely watched 200-day moving average near $4,504. Gold’s rapid August rebound has, however, pushed some momentum indicators towards levels where profit-taking becomes more likely.
Investment demand has begun to improve after weakening earlier in the year. Gold-backed exchange-traded funds attracted about $3 billion globally during July, adding roughly 23 tonnes and lifting combined holdings to about 4,068 tonnes. European funds accounted for the largest share of the inflows, while Asian investment remained positive and North American demand was comparatively subdued.
Central-bank purchases continue to provide underlying support, although buying slowed substantially during the first half of 2026. Official-sector and sovereign wealth fund acquisitions totalled about 345 tonnes during that period, the lowest first-half level since 2022. The slowdown has weakened one of gold’s strongest structural supports, making investment flows and monetary policy expectations increasingly important for the next leg of the market.
Longer-term forecasts remain broadly constructive despite the volatility. A July survey of 29 analysts and traders produced a median 2026 gold forecast of $4,509 an ounce, while several major banks have trimmed projections because of higher interest rates. Bank of America lowered its 2026 average estimate to $4,360 but maintained that $5,000 could become achievable once the Federal Reserve’s tightening cycle ends. HSBC expects gold to trade between $3,800 and $4,700 during 2026 and finish the year around $4,750.
Domestic prices are also being influenced by currency weakness. The rupee slipped to around 95.68 against the dollar on Tuesday as elevated oil prices increased pressure on import costs. MCX gold futures traded below ₹1.55 lakh per 10 grams during the session, leaving domestic buyers exposed to the competing effects of international bullion movements and a weaker currency.
Spot gold slipped about 0.4% to $4,397 an ounce during August 18 trading, after gaining roughly 0.9% on Monday. The metal finished the week ended August 14 near $4,376, up about 0.7%, extending its weekly winning run to two. US gold futures for December delivery were also lower, trading around $4,453 an ounce.
The immediate outlook remains finely balanced. Gold has recovered sharply from levels near $4,000 earlier this month, helped by a weaker dollar, softer US economic data and diminishing expectations that the Federal Reserve will raise interest rates again at its September meeting. Those forces remain supportive, but higher bond yields and the renewed rise in crude oil are limiting the scope for an uninterrupted rally.
The 10-year Treasury yield has moved higher as investors reassess inflation risks linked to escalating Middle East tensions and stronger energy prices. Higher yields normally weigh on bullion because gold pays no interest, increasing the relative attraction of government debt. Oil above $90 a barrel has complicated the picture by raising the possibility that persistent energy costs could keep inflation elevated and restrict the Federal Reserve’s ability to adopt a softer policy stance.
Traders are consequently focusing on the Federal Reserve’s July meeting minutes, due on Wednesday, for clues about how policymakers view the balance between slowing economic activity and inflation. The Fed kept its benchmark rate at 3.50%-3.75% at that meeting, although three officials favoured an increase. Weaker July employment figures, subdued consumer inflation and softer retail sales have since reduced expectations of another immediate tightening move. Markets now assign roughly a 65% probability to rates being left unchanged in September.
The dollar has also provided a significant tailwind. It has traded near multi-month lows against several major currencies as expectations for further US rate increases have faded. A cheaper dollar makes bullion less expensive for buyers using other currencies and has helped gold recover about 9% during August.
Technical conditions suggest that the rally could continue, but traders are approaching important resistance. Immediate support is emerging around $4,380, with a break below that zone potentially exposing $4,350 and then the $4,300 region. On the upside, sustained trading above $4,420-$4,450 would strengthen the case for another move towards the closely watched 200-day moving average near $4,504. Gold’s rapid August rebound has, however, pushed some momentum indicators towards levels where profit-taking becomes more likely.
Investment demand has begun to improve after weakening earlier in the year. Gold-backed exchange-traded funds attracted about $3 billion globally during July, adding roughly 23 tonnes and lifting combined holdings to about 4,068 tonnes. European funds accounted for the largest share of the inflows, while Asian investment remained positive and North American demand was comparatively subdued.
Central-bank purchases continue to provide underlying support, although buying slowed substantially during the first half of 2026. Official-sector and sovereign wealth fund acquisitions totalled about 345 tonnes during that period, the lowest first-half level since 2022. The slowdown has weakened one of gold’s strongest structural supports, making investment flows and monetary policy expectations increasingly important for the next leg of the market.
Longer-term forecasts remain broadly constructive despite the volatility. A July survey of 29 analysts and traders produced a median 2026 gold forecast of $4,509 an ounce, while several major banks have trimmed projections because of higher interest rates. Bank of America lowered its 2026 average estimate to $4,360 but maintained that $5,000 could become achievable once the Federal Reserve’s tightening cycle ends. HSBC expects gold to trade between $3,800 and $4,700 during 2026 and finish the year around $4,750.
Domestic prices are also being influenced by currency weakness. The rupee slipped to around 95.68 against the dollar on Tuesday as elevated oil prices increased pressure on import costs. MCX gold futures traded below ₹1.55 lakh per 10 grams during the session, leaving domestic buyers exposed to the competing effects of international bullion movements and a weaker currency.