Higher inflation is crushing gold because the Fed isn’t cutting rates — it might hike again

Spot gold is trading near $1,950 per ounce, down 3.8% and breaking key support at $1,980, as rising real yields and a surging dollar overwhelm its traditional role as an inflation hedge. Recent CPI and PPI reports exceeded forecasts, reinforcing the view that inflation is not cooling as hoped. That data has shifted market expectations: the Federal Reserve is no longer expected to cut rates soon. Instead, traders now price in the possibility of another hike. The 10-year Treasury yield has climbed to 4.5%. As nominal yields rise faster than inflation expectations, real yields — the return on inflation-protected debt — are increasing. That makes Treasury securities more attractive than gold, which pays no yield. At the same time, hawkish Fed sentiment is fueling demand for the US dollar. The DXY index gained 1.2%, reaching a two-month high. Since gold is priced in dollars, a stronger greenback makes it costlier for foreign buyers, dampening demand. While central bank purchases and geopolitical risks offer some floor, they’re not enough to offset the pressure from higher real yields and dollar strength. Gold’s fate now hinges on whether inflation shows clear signs of sustainably receding — or if the Fed’s next move is up, not down.