Gold Holds Above $4,100 Despite Hawkish Fed and Rising Bond Yields

Gold price has been holding above $4,100 despite some buyers stepping in during the Asian session on Tuesday. However, the bearish fundamental backdrop, including the US Federal Reserve's (Fed) hawkish outlook and elevated US bond yields, warrants caution before positioning for a meaningful appreciating move. The Fed's commitment to suppressing sticky inflation has kept the US Dollar (USD) pinned near a two-month high, acting as a headwind for gold.

US President Donald Trump's rejection of a peace proposal from Iran to resolve their military conflict and reopen the Strait of Hormuz immediately has kept the geopolitical risk premium in play. This has fueled inflationary concerns and pushed US bond yields to multi-year highs. The yield on the 30-year US government bond shot to its highest level since mid-May 2004, while the benchmark 10-year Treasury yield touched its highest since mid-June 2007.

The Fed's hawkish bias is supported by influential FOMC members who stated that another interest rate increase may be appropriate before the end of 2026. Traders are pricing in a 70% chance that the Fed would raise borrowing costs again in October amid inflation risks stemming from higher energy prices due to the Middle East conflict.

The technical analysis suggests that gold maintains a bearish near-term tone following the recent breakdown below the 200-day Exponential Moving Average (EMA) at $4,310. The metal has slipped back under the 61.8% retracement at $4,227, keeping it confined within the lower half of the recent range.