Gold Falters Near $4,300 as 5%-Plus Yields Test Safe Haven Demand

Gold prices have been struggling near $4,300 as higher US Treasury yields test investor appetite for the non-yielding metal. Despite a slight gain on Friday, gold remains down about 2% for the week, with investors questioning whether safe-haven demand can withstand a more hawkish Federal Reserve and borrowing costs above 5%. The stronger dollar and rising bond yields are raising the opportunity cost of holding an asset that pays no interest.

Philadelphia Fed President Anna Paulson's comments on Thursday reinforced expectations that the Fed's first rate increase in over three years may not be a one-off move. Futures markets now assign a 71% probability to another increase next month, up from about 53% earlier in the week. MUFG strategist Soojin Kim notes that gold is being pulled in opposite directions by geopolitical uncertainty and restrictive US monetary policy.

FXStreet analyst Dhwani Mehta warns that bullion remains vulnerable while trading below important daily moving averages, making $4,300 a crucial near-term test for buyers trying to stabilise the market. The recent decline has not yet broken the broader investment case for gold, with global gold-backed ETFs attracting $18 billion in August and central banks remaining net buyers.

The weak week highlights the ongoing tension between safe-haven demand and the impact of higher yields on the appeal of bullion relative to yield-bearing assets. As investors weigh these opposing forces, the price of gold remains a key focus for market participants.