Gold Rallies as Worst-Case Fed Outcome Comes Off Table

The recent GDP data release showed that personal consumption held steady at 2.1%, while final sales to private domestic purchasers came in at 3.9%. The soft spot was government spending and inventories, which missed estimates.

However, this didn't necessarily affect the bond market's expectations of the Fed's actions. Treasury yields moved higher after the data release because the bond market read it as a sign that the private economy is still growing.

The gold price is climbing into rising yields due to the dollar doing more work than yields are doing damage. But this won't last forever.

The current inflationary pressures, particularly from crude oil prices staying above $85, may hinder gold's rally. Every dollar it stays above $85 makes the next inflation report harder for gold bulls to count on.