Gold bulls seem hesitant as resilient US Dollar and yields cap upside

Gold (XAU/USD) experienced a brief dip-buying opportunity near the $4,139 level during the Asian session on Thursday, as it struggled to break past the $4,220 mark. Elevated US bond yields were cited as a supporting factor for the strong bullish sentiment around the US Dollar (USD), creating a ceiling for any significant gains for the non-yielding precious metal.

The US Bureau of Economic Analysis (BEA) reported on Wednesday that Personal Consumption Expenditures (PCE) Price Index increased by 3.4% year-over-year (YoY) in August, matching July's revised figure and falling short of expectations. This came after dovish comments from New York Federal Reserve (Fed) President John Williams and cautious expectations of an October rate hike.

Societe Generale’s Jan Groen noted that while core PCE undershot expectations, the details were less reassuring, with softening core goods inflation masking a reacceleration in core services and super-core inflation. Groen suggested that the economy entered the second half of 2026 with stronger momentum than previously thought, yet underlying inflation remained too elevated for the Fed to feel confident about raising rates.

Consequently, the initial market reaction was short-lived, as the US GDP growth for the second quarter of 2026 was revised upward to 2.2% annualized. Oil-driven inflation risks persisted, potentially leading to further Fed tightening, which kept US bond yields near multi-year highs. The US-Iran standoff, now escalating after President Donald Trump rejected Iran's peace proposal, has further bolstered the safe-haven Greenback, pushing it to a fresh high since July 28 and creating a challenge for gold prices.

Geopolitical risks, coupled with the prospect of additional Fed rate hikes, have capped the Gold price. Traders are now eagerly awaiting the US economic calendar, including the Weekly Initial Jobless Claims, the ISM Manufacturing PMI, and influential FOMC speeches. The upcoming US Nonfarm Payrolls (NFP) report on Friday is expected to provide more clues about the Fed's policy stance.

Meanwhile, geopolitical developments could continue to inject volatility into global financial markets, presenting opportunities for trading gold. The XAU/USD pair remains bearish, confined within a downward-sloping parallel channel with the upper boundary near $4,300. While the Moving Average Convergence Divergence (MACD) indicator turned positive, the Relative Strength Index (RSI) hovered around 44, indicating stabilizing momentum.

This suggests that downside pressure may be softening, but the prevailing bearish structure is unlikely to change. Any potential upward movement would likely be viewed as a selling opportunity and may be capped near the $4,082 support level at the lower boundary of the channel.