Gold struggles as rising US Treasury yields outweigh dovish Fed repricing

Gold (XAU/USD) is currently trading around $4,167, up 0.26% on the day, as it struggles to capitalize on its recent recovery. The US Dollar Index (DXY) has reached a fresh year-to-date high near 101.85, while the benchmark 10-year US Treasury yield has surged to around 5.34%, its highest level since 2002. These factors, along with traders scaling back expectations for an early Federal Reserve rate hike, are weighing on the precious metal.

The US Personal Consumption Expenditures (PCE) Price Index showed that inflation moderated more than expected in August, with core PCE inflation rising 0.2% month-over-month, below the 0.3% forecast, and annual inflation remaining unchanged at 3.0%. However, an upward revision to US economic growth, with annualized GDP expanding by 2.2% in the second quarter, indicates that the world's largest economy continues to show resilience.

Despite this, market expectations are shifting, with the likelihood of an interest rate increase at the upcoming Fed meeting dropping to 37% from 70% earlier in the week. The dovish Fed repricing offers some support to Gold, but traders remain cautious, as robust economic growth and rising inflation risks could continue to dominate the Fed's outlook.