Gold Under Pressure: War, Fed and Real YieldsMicro Gold FuturesCOMEX_MINI_DL:MGC1!mintdotfinanceGold is about 25% below its late-January record, and most of the fall came after the war began on February 28. Gold is typically supported by geopolitical uncertainty, yet it has fallen since the war began. The key explanation is that the war has also pushed up oil prices, strengthening inflation concerns and expectations of further Fed tightening. Since the war began, real yields and the dollar have both risen, and gold has fallen. Real yields are nominal interest rates minus inflation. Rising real yields increase the opportunity cost of holding non-yielding gold, and gold correlates inversely with them. Higher inflation-adjusted returns weaken the incentive to hold gold as a store of value. The rise in real yields therefore provides one channel through which the war’s inflation shock has weighed on gold. Why the Dollar Also Matters for Gold Gold is purchased in local currencies such as INR and CNY in major consumer markets such as India and China, so local prices can reflect both gold-market movements and currency movements. The dollar tends to rise when investors expect the Fed to raise rates. Fed expectations therefore reach gold through the dollar as well as through real yields. Investment flows provide another indication that these pressures were affecting gold demand. ETF investors sold 45 tonnes of gold in the second quarter. The World Gold Council linked the selling to weaker prices and, in North America, to higher inflation and interest rate expectations and a stronger dollar. Gold and the Dollar compared during a rate hike The September Fed decision provides a clear example of this mechanism in action. The Fed raised rates by a quarter point, its first hike since 2023. The hike itself was expected, so the bigger market signal was the prospect of further hikes. The Fed's projections and Fed Chair Kevin Warsh's press conference pointed to more. The chance of at least one more hike this year rose to 87% from 77% that morning, and the dollar index rose about 0.6%, its best day since June. Gold rose more than 1% before the decision and was down 1.2% by 3:10 p.m. ET. After the decision, gold fell as the dollar rose and expectations of more hikes increased. Looking ahead, the same mechanism should determine whether the pressure on gold persists. What keeps the pressure on, and what ends it The pressure on gold continues if investors expect the Fed to keep raising rates. Oil prices that stay high keep inflation worries and hike expectations up. Strong jobs or inflation data can push the Fed toward more hikes. The pressure eases if those expectations fall. Weak jobs or inflation data can cut hike expectations. Historical Trade Setup: August 28, 2026 Warsh speech The August 28 Jackson Hole speech by Fed Chair Kevin Warsh provides a clear example of this mechanism. His hawkish inflation message raised expectations of a September rate hike, while gold fell sharply. How a Short CME Micro Gold (MGC) Position Would Have Performed Entry: 4,656.9 USD/oz, open, August 28, 2026 Exit: 4,476.6 USD/oz, close, September 4, 2026 Move: 4,656.9 − 4,476.6 = 180.3 USD/oz → 3.87% Gross Profit: (4,656.9 − 4,476.6) × 10 = USD 1,803.00 This content is sponsored. MARKET DATA CME Real-time Market Data helps identify trading setups and more effectively express market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs at tradingview.com/cme. DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed.