Fundamentally, and the recent him broader view, gold’s retreat from its August high reflects a market more concerned about higher interest rates than attracted to its protection against inflation and geopolitical uncertainty.
Higher Treasury yields, a firm dollar and expectations of further Federal Reserve tightening have made it difficult for buyers to sustain a recovery
That highlights an important distinction for gold traders. Although gold is often viewed as an inflation hedge, higher inflation does not automatically translate into higher gold prices. If inflation leads investors to expect tighter monetary policy and higher yields, the interest-rate response can outweigh demand for inflation protection.
Gold pays no interest, so higher yields increase the opportunity cost of holding the metal. A stronger dollar can add another headwind by making dollar-denominated gold more expensive for buyers using other currencies. Spot gold fell to $3,975 last Friday, its lowest level since mid-July, before recovering above the psychologically important $4,000 level early this week.