Gold Struggles to Regain Momentum Amid Rising Bond Yields and Higher Inflation Expectations
The trading week has come to an end, and gold's price action is stuck in neutral. Over the past four sessions, XAU/USD has only seen a modest move of -0.36%, highlighting the metal's recent lack of momentum.
This indecision persists because gold faces competition from alternative markets like bonds, which have regained attractiveness lately. As long as uncertainty surrounds central banks' more aggressive actions, gold demand may struggle to establish a stronger recovery, leaving a neutral environment an important feature of XAU/USD price action in the sessions ahead.
The latest U.S. CPI figures for August came in at 3.4% year-over-year, matching expectations, while Core CPI also matched forecasts with a reading of 2.4%. Although inflation has not accelerated meaningfully, it remains above the Federal Reserve's 2.0% target, indicating persistent price pressures and a central bank objective still far from being achieved consistently.
The shift in market expectations following the CPI release is particularly interesting. Just a day prior, there was roughly a 70% probability of the Federal Reserve raising its benchmark rate to 4.00%. However, after the inflation data, that probability climbed to nearly 86%, while the likelihood of leaving rates unchanged dropped to around 13.5%. This change reinforces expectations of a more aggressive monetary policy stance in the U.S.
The most relevant consequence for gold is the recent behavior of U.S. Treasury bonds. Following the economic data release, 10-year Treasury yields have continued moving higher and are once again approaching the 5.0% area, reaching fresh highs for 2026. This dynamic is not favorable for gold because bonds remain one of its main competitors among safe-haven assets.
A sustained rise in yields may continue limiting part of the demand for gold in the short term as long as bonds retain their attractiveness. Gold could face difficulties rebuilding momentum, leaving a phase of neutrality or even moderate selling pressure an important feature of XAU/USD price action.