Gold Price Falls to Lowest Since August as Fed Hike Bets and 5% Yields Weigh

The gold price is heading for a monthly loss of roughly 6% even as the US-Iran standoff in the Gulf drags on. On Monday the metal fell to its lowest since early August, as Treasury yields above 5% and rising Fed hike bets outweighed its usual safe-haven appeal.

Where the gold price stands now

Spot gold dropped about 4% on Monday, 28 September, touching roughly $4,110 an ounce, its lowest level since 5 August. It recovered 1.4% on Tuesday to around $4,172 as softer US data trimmed rate-hike bets.

On Wednesday gold held in a narrow range just below $4,200 ahead of US inflation data. That still leaves it roughly a quarter below its January record near $5,600.

Silver followed a similar path, rising 1.2% to about $61.27 an ounce on Tuesday.

Why gold is falling despite a war in the Gulf

A conflict around the Strait of Hormuz would normally support a safe-haven asset. This time, the war is working against gold through the inflation channel.

Oil is feeding rate-hike bets

High crude prices have lifted inflation expectations and pushed the Federal Reserve into tightening. The Fed raised its target range by 25bp to 3.75%-4.00% on 16 September, its first hike since 2023, and signalled that another move is likely this year.

Brent remained above $100 a barrel on Tuesday, even after a 2.6% drop to around $102.59.

5% yields raise the cost of holding gold

Gold pays no interest, so higher bond returns increase the opportunity cost of owning it. The 10-year Treasury yield reached about 5.28% on Monday, its highest since 2007, and the 30-year topped 5.61% on Tuesday for the first time since 2002.

A firmer dollar

Higher US rates have also supported the greenback. The dollar index traded near 101.50 this week, close to its highest in about two months, which makes dollar-priced gold more expensive for buyers using other currencies.

What triggered Tuesday’s rebound

Two weak data points and a measured message from the Fed gave gold some relief on Tuesday:

• Job openings: JOLTS vacancies fell to 7.079 million in August, below the 7.225 million expected.
• Consumer confidence: the index dropped to 81.9 from 88.6, its lowest reading since 2014.
• Fed’s Williams: New York Fed President John Williams said “there is no need for urgency, and we have time to gather more information” after the September hike. He still sees one further increase as likely this year if the economy performs as expected.

Market-implied odds of an October hike fell from about 71% on Monday to around 47% by Wednesday, according to the CME FedWatch tool. Treasury yields eased too, with the 10-year slipping to about 5.22% on Wednesday.

Technical picture for XAU/USD

The sell-off has pushed gold below its main moving averages, which analysts now describe as overhead resistance:

• Moving averages: the 100-day simple moving average sits near $4,290, the 50-day near $4,320 and the 200-day near $4,540.
• Resistance: Kitco analysts flagged a $4,190-$4,222 zone as the first area above the market.
• Support: the $4,100 area around Monday’s low, then the round $4,000 level.
• Momentum: the 14-day RSI sits in the high 30s, weak but not yet in oversold territory.

These are reference points that market participants watch, not forecasts of where the price will go.

What to watch next

US inflation and jobs data

The PCE price index, the Fed’s preferred inflation gauge, is due on Wednesday at 12:30 GMT. Consensus looks for headline PCE at 3.7% year on year and core at 3.3%, both unchanged, with risks seen as tilted higher.

Analysts say a softer reading could ease pressure on gold, while a hotter one could push yields and the dollar higher again. The ISM manufacturing survey follows on Thursday and the September payrolls report on Friday.

The Gulf and oil

Iran’s foreign minister has said indirect talks with the US are taking place through Qatar, while President Trump has denied offering Iran sanctions relief. Any de-escalation that cools oil prices would ease the inflation pressure behind the Fed’s hawkish stance.

Fed speakers

With October hike odds now close to a coin flip, comments from Fed officials before the late-October meeting are likely to move yields, the dollar and gold.

Key takeaways

• The gold price fell about 4% on Monday to roughly $4,110, its lowest since 5 August, before rebounding to around $4,170.
• Gold is on course for a loss of about 6% in September and sits roughly a quarter below its January record near $5,600.
• Oil-driven inflation, the Fed’s first hike since 2023 and 5%-plus Treasury yields have outweighed gold’s safe-haven role during the Gulf conflict.
• Soft US data and Williams’ “no need for urgency” comment cut October hike odds from about 71% to around 47%.
• PCE inflation, the ISM survey and Friday’s payrolls report are the next tests for gold.

CFDs are high-risk products and most retail accounts lose money; this article is educational market commentary, not financial advice.