Gold extended its retreat to a three-week low on Wednesday as a stronger dollar, rising Treasury yields and growing Fed rate-hike bets weighed on the metal. Renewed U.S.-Iran tensions pushed oil prices higher, adding to inflation concerns that reinforced the case for tighter policy.
Gold fell for a fourth straight session on Wednesday, extending its retreat from last week's high near $4,700. At 07:42 ET, XAU/USD traded flat at $4,327.56 an ounce, while Gold Futures declined 0.5% to $4,373.00. XAG/USD rose 0.2% to $64.22 an ounce, and the US Dollar Index gained 0.1% to 99.73.
Iran escalation lifts oil and rate-hike bets
A fresh round of U.S. strikes against targets in Iran on Tuesday triggered retaliation from Tehran, marking a sharp escalation after nearly a month of relative calm. Brent crude edged lower to $94 a barrel and U.S. crude slipped below $90, though both remained near recent highs as traders weighed the risk that a prolonged conflict could disrupt energy flows through the Strait of Hormuz.
Higher oil prices matter for gold because energy costs can feed directly into inflation, which can raise the likelihood of further Fed tightening. Markets are now pricing close to a 70% probability of a Fed rate hike at the September 15-16 meeting, following Fed Chair Kevin Warsh's hawkish Jackson Hole message last week. Fed Governor Michael Barr said on Tuesday that policymakers should be prepared to raise interest rates if inflation does not ease, warning that price pressures could become embedded after remaining above the Fed's target for more than five years.
Bond selloff deepens the dollar's pull
The inflation shock is also playing out across bond markets. Thirty-year Treasury yields climbed above 5.28% on Tuesday, returning to the level seen before Treasury Secretary Scott Bessent announced the buyback expansion on August 19. The broader move has pushed government bond yields higher across major markets, with global yields reaching their highest levels since 2008, while the dollar strengthened alongside the selloff, making dollar-priced gold more expensive for international buyers.
Gold's decline follows a nearly 10% gain in August, its strongest monthly performance since January, a rally that accelerated after the Treasury increased bond buybacks and revived the debasement trade. ANZ said the Treasury's liquidity intervention had initially encouraged investors to increase their gold exposure, but the reversal in yields and the dollar has curtailed that momentum, even as the bank expects the broader debasement theme to keep attracting buyers. Gold has also suffered further technical damage after breaking below its 200-day moving average, a level widely watched as a measure of longer-term momentum.
Source: Investing.com
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