Rising Treasury yields and a stronger US dollar have dealt a severe blow to gold. For a long time, the precious metal held up amid strong physical demand, but it has now started to decline. Let’s discuss this topic and outline a trading plan for XAU/USD.
The article covers the following subjects:
Major Takeaways
- Gold is highly sensitive to forecasts for the Fed’s interest rate.
- Plunging oil prices are not saving XAU/USD from a sharp decline.
- China’s precious metal imports have already exceeded the 2025 total.
- Buying on dips remains relevant. Consider short-term sell positions if price falls below $4,250.
Weekly Fundamental Forecast for Gold
Gold has faced a stress test in the bond market and appears to have failed it badly. After the first federal funds rate hike since 2023 and Kevin Warsh’s hawkish comments, gold remained resilient. However, the renewed rise in Treasury yields put it under pressure. Even falling oil prices amid reports that the US and Iran may return to diplomacy are not helping.
Gold Weekly Performance
Source: Bloomberg.
Investors seriously believe that the US economy is strong enough to withstand several Fed rate hikes. In other words, the pace of monetary tightening seen in the past may no longer be enough to cool either the economy or inflation. The central bank needs to be more aggressive, and the futures market sees a 50% chance of interest rates rising by 100 basis points over the next 12 months. This is extremely bad news for gold.
Gold and Fed Rate Hike Expectations
Source: Bloomberg.
In theory, falling oil prices could help XAU/USD bulls. However, in the past, plunging Brent prices led to lower Treasury yields, pushing gold into consolidation even amid a strong US dollar. This is not happening now. Treasury yields are being supported by both the strength of the US economy and expectations of further Fed tightening. They are not falling significantly, keeping the precious metal under pressure.
The situation would be even worse for gold without strong physical demand, including investment demand. From January through August, China imported more than 1,000 tonnes of gold, exceeding the total for all of 2025. In August, Chinese gold-focused ETFs increased their holdings by 44 tonnes, or 18% year over year.
China’s Gold Imports
Source: Bloomberg.
According to Goldman Sachs, central banks are buying more bullion than officially reported. If average purchases reach 50 tonnes per month and the Fed does not raise interest rates in 2026, gold could return to $4,900. For now, such a scenario appears unlikely, although drivers such as US fiscal and financial sustainability concerns, government intervention in markets, and the debasement trade continue to point to a favorable long-term outlook for XAU/USD.
Gold needs a fresh catalyst to rise now, but none has emerged. Meanwhile, a continued rally in Treasury yields and the US dollar risks pushing the precious metal even lower.
Weekly Trading Plan for XAU/USD
In this situation, traders should remain patient and buy on dips over the medium and long term. Alternatively, they can open short-term sell positions if the price falls below $4,250.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of XAUUSD in real time mode
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