Why isn’t gold falling as bond yields hit their highest since 2007?

Gold extended its advance for a third session on Tuesday, holding above $4,420 an ounce as weaker US data and a softer dollar outweighed a renewed rise in Treasury yields.

Spot gold gained 0.2% to $4,424.28 an ounce in early trade, while December futures rose 0.2% to $4,480.90.

The move keeps bullion close to last week’s two-month high and puts attention on Wednesday’s Federal Reserve minutes for evidence that policymakers are becoming more comfortable leaving rates unchanged through the rest of 2026.

Fed hold expectations are doing the heavy lifting

The macro backdrop has shifted quickly in gold’s favour. US nonfarm payrolls fell by 23,000 in July, while retail sales dropped 0.6%, their first monthly decline since October.

July consumer inflation also eased to 3.4% from 3.5% in June, helping markets price roughly a 65% chance that the Fed leaves rates unchanged in September.

The central bank kept its target range at 3.5%-3.75% in July, although three policymakers dissented in favour of a quarter-point increase.

IG market analyst Tony Sycamore sees last week’s run of softer US data as strengthening the case for a prolonged pause, giving gold room to extend gains.

Lower expected rates generally support bullion because they reduce the opportunity cost of holding an asset that pays no interest.

Dollar weakness is adding another layer of support, with the US currency remaining close to multi-month lows against several major peers.

Gold is holding up even as bond yields rise

What makes Tuesday’s move notable is that gold is advancing despite pressure from the bond market.

The US 10-year Treasury yield climbed to about 4.72%, while the 30-year yield touched 5.32%, its highest level since 2007. Normally, rising long-term yields make non-yielding bullion less attractive.

The fact that gold has absorbed that move suggests rate expectations are not the only force at work.

Investment demand has also improved: global physically backed gold ETFs attracted $3 billion in July, while holdings increased by 23 tonnes to 4,068 tonnes, according to the World Gold Council.

That gives the market a firmer base than a rally driven purely by short-term Fed positioning.

Iran risk restores gold’s safe-haven appeal

Geopolitics is providing the other leg of support. Iran has warned that it could adopt a more offensive military posture after efforts to secure a permanent settlement with Washington stalled.

Brent crude has climbed back above $91 a barrel, reviving inflation concerns but also reinforcing demand for defensive assets.

Sycamore believes gold is beginning to regain some of its traditional safe-haven role even as yields rise. The next test is Wednesday’s Fed minutes, due at 2 pm ET.

A cautious tone would strengthen the case for another challenge of $4,500, while hawkish language could trigger fresh profit-taking after gold’s strong August rebound.