Gold's Rally Falters as Yields Rise and Fed Rate Hike Bets Return

Gold's recent rally has lost momentum due to rising US Treasury yields and renewed expectations of Federal Reserve rate hikes. After gaining 11 percent over July and August, gold prices have declined 6 percent so far this month, trading around $4,300 an ounce.

The CME FedWatch tool now shows a 68 percent probability of a 25-basis-point hike in October, up from 57 percent a week ago. Higher interest rates and bond yields typically reduce the appeal of gold, as the metal does not offer an income.

Analysts see near-term pressure on gold due to rising yields, but central bank buying could provide structural support for the non-yielding asset. Central banks continued accumulating gold through the summer despite elevated prices and tighter monetary policy, with China's People's Bank of China buying 20.2 tonnes of gold in August.