Gold forecast: Rising yields become too hot for gold, but the outlook is far from bearish

Gold and silver prices took a plunge today, with the former down 3% and the latter falling some 5% by mid European session, before bouncing off their lows. The losses come after the metals remained largely supported until last week, despite the big dollar rally and surging bond yields as we have seen in recent weeks. But it simply got too much, and the metals succumbed to pressure today. Still, the downside could be limited from here on, with the potential for the dollar basement trade to return while central banks are likely to remain active purchasers of gold. That said, a technical bullish signal is now needed to re-align the short-term price action with the longer-term bullish outlook.  

 

Rising yields and dollar strength remain key obstacles

 

The current macroeconomic backdrop remains challenging for gold. The Fed’s hawkish September decision, alongside monetary tightening by the ECB and BoJ, has reinforced expectations of higher interest rates, helping drive the dollar higher and sending bond yields soaring. This is all to do with elevated oil prices of course. Higher yields increase the opportunity cost of holding gold, particularly as inflation-adjusted returns on government bonds remain positive. Yet, until today’s selling, the metal has proved relatively resilient, suggesting that other forces are supporting demand.

 

Will central bank buying continue supporting prices?

 

Central bank buying remains one of the most important sources of support for gold prices. According to the World Gold Council, central banks purchased 23 tonnes in July, led by China and Poland. Reported purchases reached around 130 tonnes in the first seven months of the year. Although below the same period in 2025, the figures highlight that elevated prices have not deterred official-sector demand.

 

With concerns over fiscal sustainability and exposure to US Treasuries persisting, further diversification into gold could provide an important cushion as we head into the latter stages of the year. This could, ultimately, keep gold’s downside limited, all else being equal.

 

Read our full gold Q4 2026 outlook

 

Could the dollar debasement trade return?

 

For now, the dollar is continuing to find good support amid a hawkish Federal Reserve, rising oil prices, and not-so-weak macro data. We have important employment coming up this week, which could provide gold some volatility in the near-term. But in the longer run, a shift in the US dollar’s direction could provide another bullish catalyst for gold.

 

This could happen if there is finally a a diplomatic breakthrough between Washington and Tehran, particularly one that facilitates the reopening of the Strait of Hormuz. If that happens in the coming weeks, it could bring oil prices lower, ease inflation concerns and reduce expectations of further Fed tightening. This could weaken the dollar and support gold.

 

Alternatively, another source of weakness for the dollar could be from persistence in bond-market stress. So far, this has proven dollar-positive, but if it gets to the point that confidence in US fiscal sustainability takes a hit, the greenback could quickly fall out of favour to fiat alternatives like gold, silver and Bitcoin, as well as other alternative stores of value.

 

Gold technical analysis and levels to watch

 

Gold’s long-term trend remains bullish, so today’s selling shouldn’t be confused with a structural shift in that macro trend. Still, the near-term picture has become even less convincing, with the metal now breaking further lower after consolidating for much of last week.

 

 

The focus is now turning to the short-term trend line that was created after XAUUSD rebound from $4,000 in early August. This comes in right between two important support levels: $4,100 and $4,165. The former was the last high pre breakout in August, while the latter marks the late July peak. Once resistance these levels could now turn into support.

 

But even if we do see a rebound from the $4,100 - $4,165 zone today, we will need to see a confirmed bullish reversal sign to convince the bulls that a low has been created.

 

Resistance currently sits around $4,250 to $4,325, an area that was previously support. As a minimum, I would like this area to now give way for me to turn tactically bullish in the short-term. I would also like to see the $4,400 level to be reclaimed, and quickly so.

 

However, if the short-term selling continues, then the $4,000 could be tested again in the coming days. A decisive move beneath the summer low of $3,942 would significantly weaken the longer-term outlook, potentially exposing $3,500.