Gold can’t catch a PCE break as long US yields keep climbing

Gold prices fell on Wednesday, slipping 0.6% after US inflation data exceeded the Federal Reserve's 2% target but fell short of expectations. The XAU/USD is currently trading at $4,155. The Fed's preferred inflation gauge, the core PCE Price Index, remained flat in August at 3.0%, below market forecasts of 3.3%. The headline PCE figure was 3.4%, unchanged from July and under estimates of 3.7%.

This data prompted a shift in expectations, with traders now anticipating the Fed to keep rates steady at the October meeting, with odds at around 62%, according to Prime Terminal. In anticipation of the inflation release, ADP's jobs data showed a gain of 90,000 private sector workers, surpassing estimates of 70,000 and supporting Fed Chair Kevin Warsh's assertion that the labor market aligns with full employment.

Consequently, the US Dollar Index (DXY) dipped to a low of 101.02 before recovering above 101.30, signaling a mixed response. US Treasury yields are climbing rapidly, with the 30-year bond yield increasing by 8 basis points to 5.647% and the 10-year note rising by nearly 7 basis points. The US economy expanded by 2.2% in Q2 2026, outpacing forecasts of 1.5%, further bolstering its resilience.

Meanwhile, the US trade deficit expanded in August. As markets now focus on upcoming Fed speakers and jobless claims before the release of September's Nonfarm Payrolls data on Friday, gold's downtrend persists as the non-yielding metal has yet to reclaim the base trendline of a bullish wedge. Although momentum has shifted slightly bullish, the Relative Strength Index (RSI) remains negative, indicating that sellers are in control.

Therefore, the prevailing trend is downward. The primary support for XAU/USD is the $4,100 mark, followed by the July 29 swing low of $3,996 and the July 17 low at $3,959. Should these levels be surpassed, the next focus will be the year-to-date low at $3,941. For a bullish reversal, gold must break above the 100-day Simple Moving Average (SMA) at $4,287.

Gold has historically been a store of value and means of exchange, widely used as a hedge against inflation and depreciating currencies. Central banks are the largest holders of gold, diversifying their reserves to bolster their currencies during turbulent times. Gold's inverse correlation with the US Dollar and US Treasuries, both major safe-haven assets, means that a depreciation in the Dollar typically leads to a rise in gold prices, allowing investors and central banks to diversify their portfolios in uncertain times.