Gold Trading Alert: Gold Prices Rebound Over 1%! Dollar and Yields Fall Together, But Is a Bigger Storm Brewing?

Huitong Network, September 3rd—— Gold prices rebounded by more than 1% on Wednesday, boosted by declines in both the U.S. dollar and U.S. Treasury yields, bouncing from nearly a one-month low. However, the escalation of the U.S.-Iran conflict has pushed up oil prices, strengthening inflation expectations and prospects for rate hikes. The likelihood of a Federal Reserve rate hike in September has risen to 64%, and gold prices remain under pressure. The upcoming U.S. non-farm payrolls data will serve as a key short-term indicator.

After several consecutive days of heavy selling, the gold market finally saw a long-awaited rebound on Wednesday (September 2). Spot gold rose by 1.36%, closing at $4,387.56 per ounce, recovering more than $100 after hitting the lowest level since August 7 at $4,282.48 earlier in the session. U.S. December gold futures edged up 0.4% to close at $4,414.60. In Asian trading on Thursday (September 3), spot gold was fluctuating narrowly and is currently trading near $4,385 per ounce.

This rebound was directly driven by the simultaneous pullback in the U.S. dollar and Treasury yields from recent highs. The U.S. dollar index dipped 0.11% on Wednesday to 99.54, retreating from an intraday high of 99.85 (the highest in nearly three weeks); the yield on the 10-year U.S. Treasury note also declined by 0.2 basis points to 4.794% after reaching an intraday three-year high of 4.818%, ending a five-day winning streak. David Meger, director of metals trading at High Ridge Futures, commented, “One reason gold returned above breakeven is because we saw yields pull back slightly intraday, which allowed gold to rebound from recent lows.”

However, how durable is this rebound? Beneath the surface price recovery, gold is at a crossroads, caught in a fierce struggle of multiple forces—geopolitical tensions have driven up energy prices, reinforcing expectations of rate hikes and pushing the probability of a September Fed rate hike to 64%, continuously suppressing zero-yielding gold; meanwhile, the upcoming non-farm payrolls data may act as a key catalyst determining gold’s short-term direction. Is this rebound a signal of trend reversal, or just a technical pause in a sharp decline?

Source of the Rebound: Loosening of the “Double Squeeze” in Dollar and Yields

To understand the logic behind this round of gold’s rebound, it is necessary first to clarify why gold prices had tumbled to nearly a one-month low. Over the past week or so, gold slid more than 7% from the recent high of $4,696 per ounce set in late August. The root cause of this plunge was the simultaneous surge in both the U.S. dollar and Treasury yields, creating a “double squeeze” on gold.

The dollar’s strength began with the hawkish speech by Fed Chairman Walsh at the annual Jackson Hole global central bank symposium. Walsh emphasized that the pace of U.S. inflation slowdown was not apparent and that policymakers must ensure inflation returns to the 2% target—a steadfast goal. This stance caused market expectations for a September Fed rate hike to soar from around 35% to over 66%. The dollar index strengthened accordingly, rising 0.25% to 99.68 on September 1 and hitting an intraday near three-week high of 99.85 on September 2.

At the same time, Treasury yields surged sharply. The 10-year U.S. Treasury yield climbed about 17 basis points from 4.630% to 4.799% over five consecutive trading days, peaking intraday at a three-year high of 4.818%; the 30-year yield spiked to a two-week high of 5.296%. The surge in yields was directly triggered by inflation worries caused by soaring oil prices—the escalation of the U.S.-Iran conflict pushed Brent crude above $95 a barrel and WTI above $91. The rapid rise in energy prices reignited concerns about persistent high inflation, further strengthening expectations for Fed rate hikes.

However, by Wednesday, the situation changed subtly. As oil prices retreated and investors assessed the latest economic data, Treasury yields pulled back from years-high levels. The ADP National Employment Report showed only 38,000 new private sector jobs in August, lower than the expected 48,000. The disappointing data eased market concerns that an overheated labor market would force the Fed into aggressive rate hikes, prompting yields to retreat from highs. The dollar index also slipped from its near three-week high.

It was precisely this loosening of the “double squeeze”—the dollar and yields—that paved the way for gold’s rebound. Thomas Urano, co-chief investment officer at Sage Advisory, analyzed, “Everyone likes to attribute the issue to one single factor, but in reality, it’s a series of events in succession. We’re in a situation where policy decision-making is extremely difficult, and with results like today’s ADP print unexpectedly below estimates, we see growth is rather slow. Suddenly, inflation and employment no longer come from the same playbook, and when they point in different directions, monetary policy becomes very complex.”

Geopolitical Tension Fuels Inflation Worries, Global Tightening Wave Arrives

According to traditional logic, heightened geopolitical tensions should boost safe-haven demand for gold and drive up prices. However, the reality is just the opposite—gold prices continued to fall during the conflict escalation, at one point dipping below $4,300.

The core reason behind this is a fundamental shift in how geopolitical conflict impacts gold. When conflict first drives up energy prices and thereby strengthens inflation expectations, the pressure on the Fed to keep rates high rises, supporting the dollar and Treasury yields, which ultimately have a net negative effect on gold. Analysts point out, “When geopolitical risks are transmitted mainly through the inflation and rate channels, gold’s safe-haven attribute often fails temporarily.”

The escalation path of the recent U.S.-Iran conflict clearly illustrates this logic. On September 2, the U.S. military struck Iran’s air defense facilities, radar systems, maritime assets, and communication sites along the southern coast in response to Iranian attacks on merchant ships. Iran promptly retaliated by attacking U.S. facilities in Bahrain, Jordan, Kuwait, and Iraq—the largest-scale firefight between the two since July. The escalation immediately raised market concerns about the security of passage through the Strait of Hormuz—about 20% of the world’s oil and LNG transport passes this vital chokepoint. Preliminary shipping data from Kpler showed only four bulk commodity vessels passed through the Strait of Hormuz that day, far below the ten-day average of about thirteen.

The rise in oil prices quickly translated to higher inflation expectations, thus raising the probability of a Fed rate hike. The sharp shift in rate expectations meant that the safe-haven attribute of gold was completely offset by the suppression effect of higher real rates.

What’s more, the conflict exerts pressure on gold through another channel—higher oil prices drive up energy costs, directly exacerbating inflationary pressure and forcing global central banks to maintain or even tighten monetary policy. The Reserve Bank of New Zealand announced a 25 basis point rate hike to 2.75% on September 2; it is widely expected that the European Central Bank will raise rates on September 10, and the probability of a Bank of Japan hike on September 18 is as high as 92%. This global wave of monetary tightening puts systematic pressure on zero-yielding assets like gold.

Intensification of the Bull-Bear Struggle

The gold market is currently in the midst of intense competition between bullish and bearish forces, with multiple factors intertwining, making gold’s price outlook highly uncertain.

On the downside, elevated expectations for Fed rate hikes remain the core pressure point. Although the ADP data coming in below expectations has temporarily eased market concerns, the probability of a September increase is still as high as 64%. Several Fed officials have also recently made hawkish statements. New York Fed President Williams said the rise in long-term bond yields is not driven by inflation fears, but indicates economic strength; Governor Barr argued that rates should be hiked decisively if inflation fails to fall quickly; Chairman Walsh stressed that if confidence in returning inflation to 2% is lacking, there is still room for policy action. Walsh’s speech last Friday at Jackson Hole directly triggered this round of gold’s sharp decline. As long as rate hike expectations continue to suppress, gold’s valuation anchor cannot improve effectively.

The trend in Treasury yields is equally unpromising. Despite the pullback on Wednesday, the 10-year yield remains elevated at 4.794%, just shy of the three-year high of 4.818%, while the 30-year yield is at 5.267%. A global wave of bond sell-offs continues—Japan’s 10-year government bond yield has reached 3% for the first time since 1996, Germany’s 10-year yield is at a 15-year high of 3.36%, and France’s is at a post-2008 high of 4.21%. The global synchronous rise in yields means gold faces systematic holding cost pressure.

Technical breakdowns are also cause for concern. Last Friday, spot gold broke below its 200-day moving average—a level most institutions consider a medium-term trend watershed. Gold has been unable to quickly reclaim this key level and instead has been under continuous downward pressure; once breached, such critical levels often have self-reinforcing effects—bears accelerate their entry, bulls are forced to stop-loss, triggering a chain reaction. The World Gold Council warns that if gold falls further, $4,215 will be a key support level.

On the positive side, gold is not without support. The latest research from Deutsche Bank provides a noteworthy perspective—systematic investment fund buying that drove the recent gold rally is nearly exhausted, and selling pressure is also close to depletion. Daniel Ghali, head of metals research at Deutsche Bank, notes in a report that over the past month, spot gold saw large-scale selling, with intensity at the 86th percentile of the past five years. But Deutsche Bank quantifies a trigger threshold for algorithmic trading: CTAs (Commodity Trading Advisors) would need gold prices to drop below $4,315 per ounce to unleash the next round of systematic selling. Above this level, ordinary declines are insufficient to trigger algorithmic mass liquidations; but once prices rise, CTAs will be forced to rebuild previously closed long positions. This asymmetric structure means gold’s further downside could be limited, while any rebound might trigger forced algorithmic buying.

From a medium- to long-term perspective, the macro narrative for gold remains intact. Four major macro drivers—de-dollarization, asset diversification, currency depreciation, and fiscal dominance—continue to ferment. Data from the World Gold Council shows that in Q2, global central banks and other official institutions increased gold reserves by a net 289 tons, a 62% year-on-year increase. The People’s Bank of China has increased gold holdings for 21 consecutive months. U.S. debt has surpassed $40 trillion, deepening concerns over U.S. fiscal sustainability; central banks’ tendency to hedge this credit risk with gold is unlikely to reverse with a single rate hike. TD Securities still maintains its Q3 2027 gold price target at $5,350 per ounce.

Outlook: Non-Farm Payrolls May Become Key Indicator

In the short term, gold’s trend will depend greatly on the U.S. non-farm payrolls report to be released this Friday. The ADP data has given a worse-than-expected sample, but only the non-farm data can truly determine the Fed’s policy direction. Urano from Sage Advisory points out that policy making is now facing an extremely challenging situation—“When inflation and employment no longer point in the same direction, monetary policy becomes very complicated.”

If non-farm data comes in well below expectations, it may further weaken the urgency for a September Fed hike, giving gold more room for a rebound. Conversely, if non-farm numbers are strong, expectations for a hike may strengthen and suppress gold again. According to the Chicago Mercantile Exchange, the probability of a September rate hike has jumped from 36.6% a week ago to 64.2% now—this expectation is already quite robust, and any data “surprise” could spark dramatic market volatility.

On a broader macro level, gold is caught in a tug-of-war between “safe-haven logic” and “rate logic.” Geopolitical risk, diminished dollar credibility, central bank gold purchases, and other safe-haven factors offer long-term support for gold; while inflationary pressure, rate hike expectations, and rising yields exert short-term downside pressure. Analysts point out, “In the medium term, the core of a trend reversal in gold prices remains the trajectory of real rates and the dollar—only if inflation worries ease, rate hike expectations subside, or geopolitical conflict escalates to shake global financial stability, can gold resume an upward trend.”

For investors, the current complexity of the gold market cannot be underestimated. On one hand, gold has corrected about 7% from recent highs, and short-term technical oversold conditions may provide a rebound opportunity; on the other hand, the uncertainty of the Fed’s rate hike cycle and the global systematic rise in yields mean gold’s adjustment may not be over. Simon-Peter Massabni, head of business development at multi-asset broker XS, points out, if Treasury yields stabilize or fall, U.S. fiscal issues will return to the forefront, and gold investment demand may strengthen again. He further adds that if gold can maintain its overall bullish structure and buyers re-enter at key support levels, this correction could represent a chance to rebuild long positions rather than signal a new bearish trend.


(Spot gold daily chart, source: Easy Huitong)

At 07:44 Beijing time, spot gold was last quoted at $4,386.58 per ounce.