Gold (XAU/USD) attracted some dip-buying near the $4,139 region during the Asian session on Thursday, following a pullback from the $4,220 area reached after softer-than-expected US inflation data was released. The US Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) Price Index rose 3.4% year-over-year in August, unchanged from the previous month's downwardly revised reading and below the estimated 3.7%. The core PCE, excluding food and energy, matched July's downwardly revised 3% year-over-year rate, also missing expectations. These figures, combined with dovish comments from New York Fed President John Williams and reduced bets on an October rate hike, provided some support for gold prices [1].
However, elevated US bond yields continue to support the US Dollar's bullish sentiment, capping gold's upside potential. Societe Generale’s Jan Groen noted that while core PCE undershot expectations, underlying price pressures remain firm due to a reacceleration in core services and super-core inflation. Groen emphasized that modestly favorable inflation revisions were overshadowed by more significant growth revisions, with the US economy entering the second half of 2026 with stronger momentum than previously thought. As a result, a pause in October remains possible, but an October hike is still on the table pending further data, specifically September CPI and PPI figures [1].
The initial positive reaction in gold was short-lived after the US GDP growth for Q2 2026 was revised upward from 1.5% to 2.2% annualized. Additionally, oil-driven inflation risks and ongoing geopolitical tensions, particularly the US-Iran standoff, have kept US bond yields near multi-year highs and supported the US Dollar. According to CME Group's FedWatch Tool, traders are pricing in an over 85% chance that the Federal Reserve will raise borrowing costs by the end of the year. The safe-haven appeal of the US Dollar was further boosted as hopes for a diplomatic solution to the US-Iran war faded after President Donald Trump rejected a seven-day peace proposal from Iran, with expectations of renewed military operations and bombing [1].
CONCLUSION
Gold prices remain under pressure as a resilient US Dollar and elevated bond yields limit upside, despite softer-than-expected inflation data. Market participants are closely watching upcoming economic data and geopolitical developments, with the likelihood of further Fed tightening keeping sentiment cautious.