Gold Pulls Back as USD and Treasury Yields Rise, Markets Await Signals from the Fed

The US dollar has rebounded notably in recent sessions. The Dollar Index (DXY) recovered from its previous lows and at one point climbed above 100.2, marking its highest level since May 2025. A stronger greenback makes gold more expensive for investors holding other currencies, thereby exerting downward pressure on the precious metal.

At the same time, the US 10-year Treasury yield has remained elevated around 4.2–4.3%, reflecting expectations that interest rates in the United States may stay higher for longer. When bond yields rise, the opportunity cost of holding gold also increases, which tends to reduce the appeal of the non-yielding asset in the short term.

Another factor influencing market sentiment is the ongoing conflict between the United States and Iran, which has kept oil prices elevated. Higher energy prices have raised concerns that inflation could reaccelerate, potentially forcing the Federal Reserve (Fed) to maintain a more cautious monetary policy stance. These concerns have contributed to rising bond yields and have added further pressure on gold in recent trading sessions.

Despite these headwinds, gold has so far managed to hold the key psychological level of $5,000/oz. In the short term, the precious metal may continue to trade sideways around this level as investors await clearer signals from the Fed’s upcoming policy meeting. Much of the expectation that the Fed could maintain higher interest rates for longer has already been partially priced in during the recent pullback.

From a medium-term perspective, gold’s outlook continues to be supported by structural factors within the global financial system. Amid persistent geopolitical tensions and increasing fragmentation of the global financial landscape, many countries are seeking to diversify their reserve assets and reduce reliance on the US dollar, with gold remaining a key alternative.

According to the World Gold Council (WGC), central banks purchased a net 5 tonnes of gold in January 2026, significantly lower than the average of around 27 tonnes per month recorded in 2025. However, the WGC suggests that this may represent only a temporary slowdown rather than a shift in the longer-term trend. A survey conducted by the organization also indicates that 95% of central banks expect global gold reserves to increase over the coming year, highlighting that central bank demand remains an important support for the gold market.

Overall, while gold is currently facing short-term pressure from a stronger US dollar and rising Treasury yields, the precious metal may still hold near the $5,000/oz psychological level provided the Fed does not adopt a more hawkish stance than markets expect. Over the longer term, factors such as geopolitical risks, continued central bank gold accumulation, and the ongoing diversification of global reserve assets are likely to remain key pillars supporting gold prices.