Gold Gridlocked as US Dollar and Treasury Yields Pull in Opposite Directions

Gold (XAU/USD) is stuck in its month-old range between $4,000 and $4,200 as the Federal Reserve's new policy framework fails to break the precious metal out of its sideways grind. The US Dollar remains relatively soft, but rising Treasury yields are keeping a lid on XAU/USD's recovery.

After the Fed kept interest rates unchanged at 3.50%-3.75%, Gold briefly surged above $4,100 as traders unwound positions built around a potential surprise hike. However, the metal struggled to hold its gains as longer-dated Treasury yields advanced, climbing above 5.20% for the first time since 2007.

The US Personal Consumption Expenditures (PCE) Price Index, due at 12:30 GMT, could influence Fed rate expectations and provide a catalyst for Gold. The CME FedWatch Tool still shows a 63% probability of a rate hike in September as the war in the Middle East keeps energy-driven inflation risks elevated.