Gold Holds Gains as Firm Dollar and Yields Cap Breakout

Key Moments

Gold Edges Higher but Stays Capped Below $4,200

Gold (XAU/USD) extended its intraday climb heading into the European session on Thursday, erasing the prior day’s modest losses. The move followed a small pullback during Asian trading that was subsequently bought into. Despite the recovery, buyers struggled to generate any decisive follow-through, with the metal still trading beneath the $4,200 barrier as a stronger US Dollar limited upside momentum.

The US Dollar advanced to a new peak since July 28, supported by elevated US bond yields. Those higher yields continued to weigh on the appeal of non-yielding assets such as gold, reinforcing a cautious stance among bullish traders even as prices attempted to stabilize.

US Inflation Data Offers Mixed Support for Bullion

Data from the US Bureau of Economic Analysis (BEA) released on Wednesday showed that the headline Personal Consumption Expenditures (PCE) Price Index rose 3.4% year-on-year in August. That outcome matched the prior month’s downwardly revised figure and came in below expectations for a 3.7% reading.

The core PCE gauge, excluding food and energy, also printed at 3% year-on-year, aligning with July’s downwardly revised pace and again falling short of forecasts. These softer readings, combined with dovish remarks from New York Federal Reserve President John Williams and reduced expectations for an October rate increase, lent some support to gold prices.

Strategist View: Inflation Revisions and Fed Outlook

Societe Generale’s Jan Groen characterized the latest US inflation signals as mixed for policymakers. While noting that “Core PCE undershot expectations,” he emphasized that “the details were less reassuring,” pointing to “softer core goods inflation” masking “a reacceleration in core services and super-core inflation, pointing to still-firm underlying price pressures.”

On the broader macro backdrop, Groen argued that “inflation revisions were modestly favorable, but growth revisions were more important.” He observed that “the economy entered 2H26 with stronger momentum than previously thought, while underlying inflation remains too elevated to provide the Fed with clear comfort.” As a result, Societe Generale concluded that “a pause in October remains possible, but an October hike remains on the table pending September CPI and PPI data.”

Growth Revisions, Oil Risks, and Fed Expectations Support USD

The initial positive reaction in gold following the PCE report faded after US GDP growth for the second quarter of 2026 was revised higher from 1.5% to 2.2% on an annualized basis. The stronger growth profile, combined with concerns that higher oil prices could fuel renewed inflation pressures, shored up expectations for additional Federal Reserve tightening and helped keep US bond yields near multi-year highs.

According to CME Group’s FedWatch Tool, market participants continued to assign an over 85% probability that the Federal Reserve would raise interest rates again by the end of the year. This backdrop, together with a robust US Dollar, constrained the upside for bullion prices.

US-Iran Tensions Bolster Safe-Haven Dollar, Weigh on Gold

Geopolitical developments further underpinned demand for the US Dollar. The US-Iran standoff pushed the currency to its highest level since July 28, limiting the appeal of gold as an alternative safe-haven.

Hopes for a negotiated end to the US-Iran war diminished after President Donald Trump rejected a seven-day peace initiative from Iran aimed at ending the conflict and reopening the Strait of Hormuz. The report added that Trump informed aides he anticipates major combat operations and renewed bombing against Iran to resume after the November midterm elections.

In another escalation, US Secretary of State Marco Rubio instructed the Iranian delegation to leave the country immediately amid stalled peace talks. These developments preserved a geopolitical risk premium, favored USD strength, and acted as a headwind for gold prices.

Data and Fed Speakers in Focus Ahead of NFP

Traders turned their attention to the upcoming US economic releases, including the regular Weekly Initial Jobless Claims and the ISM Manufacturing PMI. In addition, commentary from several influential Federal Open Market Committee (FOMC) members was expected to influence US Dollar sentiment and, in turn, gold price dynamics.

The market focus remained centered on the US Nonfarm Payrolls (NFP) report scheduled for Friday, which investors viewed as a key input for assessing the Federal Reserve’s policy trajectory. Meanwhile, any new geopolitical headlines were expected to inject further volatility into global markets and potentially create trading opportunities in gold.

XAU/USD Technical Picture: Bearish Structure Intact

On the technical front, XAU/USD continued to trade with a bearish, constrained bias inside a downward-sloping parallel channel. The upper boundary of this channel aligns with the 100-period Simple Moving Average (SMA) on the 4-hour chart, creating a significant area of overhead supply near $4,300.

The Moving Average Convergence Divergence (MACD) indicator has moved into positive territory, while the Relative Strength Index (RSI) hovered around 44, suggesting that selling pressure has eased somewhat. However, these mixed momentum readings point more to a moderation in the existing downtrend than to a confirmed bullish reversal.

As a result, any subsequent rallies are likely to be viewed as opportunities to re-establish short positions, with the aforementioned confluence near $4,300 expected to act as a firm cap. On the downside, the lower boundary of the channel around $4,082 represents key support. A decisive break below that level would likely pave the way for an extension of the broader bearish move in the near term.

US Dollar Performance This Week

The following table summarizes the percentage changes of the US Dollar (USD) against major counterparts this week, with the USD emerging as strongest versus the Swiss Franc.

The related heat map illustrates percentage moves among major currencies, with the base currency listed on the left and the quote currency across the top. For instance, selecting the US Dollar from the left column and tracing across to the Japanese Yen shows the percentage change for USD (base)/JPY (quote).