Gold Under Pressure as US Yields and Dollar Strengthen
Gold prices have faced renewed selling pressure following the latest interest rate hike by the US Federal Reserve. On September 16, the Fed increased its benchmark rate by 25 basis points to 3.75-4.00 percent, marking its first rate increase in over three years. This move, along with rising Treasury yields and a stronger US dollar, has diminished the appeal of the non-yielding precious metal. The 10-year US Treasury yield recently reached 5.25 percent, its highest level since 2007, while the Dollar Index climbed above 101.
The combination of higher yields and a stronger dollar presents a double challenge for gold. A robust dollar makes gold more expensive for international buyers, while higher bond yields increase the opportunity cost of holding gold, which offers no regular income. Despite heightened geopolitical uncertainty, which typically supports gold, these factors have outweighed safe-haven demand.
Geopolitical tensions in West Asia have had a limited impact on gold prices. While such uncertainty usually boosts safe-haven demand, the conflict has also driven up crude oil prices, reinforcing inflation concerns. This, in turn, strengthens expectations of prolonged restrictive monetary conditions, further pressuring gold. However, persistent geopolitical risks continue to provide some support, preventing a deep correction.
Central-bank demand remains a key source of support for gold. Central banks purchased 289 tonnes of gold in Q2 2026, bringing total purchases for the first half of the year to 345 tonnes. The World Gold Council expects central banks to continue accumulating gold, driven by reserve diversification and inflation hedging. However, annual purchases may not match 2025 levels.
Looking ahead, gold is likely to remain influenced by opposing forces. Elevated Treasury yields and a stronger dollar could limit significant upside, while geopolitical uncertainty and central-bank buying may provide support. The World Gold Council anticipates a mild positive bias for gold towards year-end, with prices likely to stay range-bound and volatile.