The U.S. Treasury and the Federal Reserve are sending conflicting signals to the market, while the World Gold Council (WGC) points out that recent events have been net negative for gold overall: gold prices have fallen and global bond yields have risen. A report released by the organization on Tuesday (September 1st) outlines the current situation of gold in this "policy tug-of-war" for investors.

Fiscal and monetary policies are at odds, with the Federal Reserve firing more shots.

The US Treasury seems to want lower yields, while the Federal Reserve wants lower inflation. Neither wants to disrupt the economy, and disrupting the economy might be the most difficult way to achieve both simultaneously. "Of the two, the Fed has more firepower," analysts at the World Gold Council wrote on Tuesday. "So when Chairman Warsh gave a hawkish tone last Friday, the market jolted. The two-year yield fluctuated sharply, reflecting pricing in tightening expectations, and gold prices subsequently fell below the 200-day moving average." Analysts pointed out that the still-overheated US inflation data, coupled with Warsh's hawkish speech at the Jackson Hole symposium, increased market bets on a near-term Fed rate hike, thus raising the perceived opportunity cost of gold and weakening its appeal. "Meanwhile, global gold ETF inflows continue, albeit at a slower pace; net long positions in futures have increased, while overall bullish positions in options have declined slightly," the analysts wrote.

Technical Warning: After encountering resistance at the 50% retracement level, the market may be forming a sideways trading range.

Turning to a technical perspective, analysts at the World Gold Council stated that with weakening short-term momentum and continued rise in global bond yields, gold prices face the risk of falling back to the 55-day moving average. The analysts wrote, "Gold's strength extended to near the 50% retracement level of the 2026 decline and resistance near the May highs of $4769-$4774 per ounce. The subsequent sharp pullback has pushed the market back below the 200-day moving average, entering a potentially forming sideways range." The analysts added, "With the daily RSI momentum completing a top and net long positions rising significantly, we believe there is room for a deeper pullback within this range, especially considering the rising bond yields we are seeing globally."

Key levels: $4215 on the downside, $4530 on the upside.

Analysts stated, "Initial support is at the mid-August low of $4,311 per ounce, and more importantly, the rising 55-day moving average, currently at $4,215 per ounce. Our inclination is to find a bottom here again. Initial resistance is at the 13-day exponential moving average at $4,474 per ounce, followed by the 200-day moving average, currently at $4,530 per ounce. A rise above this level would be considered a reversal of the short-term trend to bullish, at which point resistance would re-enter the recent high of $4,696 per ounce, and the $4,769 to $4,774 per ounce area."

Conclusion

Caught between the Treasury's push to suppress yields and the Federal Reserve's push to curb inflation, gold is experiencing a period of uncertainty. In the short term, Warsh's hawkish stance and rising global bond yields have eroded gold's confidence in breaking above the 200-day moving average; however, the World Gold Council also points out that multiple support levels at $4311 and even $4215 are still providing a safety net for this pullback. Whether the current sideways movement is a consolidation phase or a top formation for gold depends on how far this upward trend in global bond yields can go. Spot gold daily chart source: FX678. At 13:31 Beijing time on September 2nd, spot gold was trading at $4322.82 per ounce.