The calm before the storm can be deceptive. On Tuesday, gold suffered its worst day in almost a month as a US Treasury sell-off pushed 30-year yields to near two-decade highs. On Wednesday, the metal caught its breath: selling in Treasuries eased, and the pressure on the non-yielding precious metal abated somewhat.

Gold's recovery above $4,400/oz has been supported by investor demand and central?bank buying, notably from China. According to Bank of America's fund-manager survey, the share of respondents who consider gold undervalued rose to its highest level since March 2023.

But geopolitics is ready to upset the narrative. US President Donald Trump said talks with Tehran are not underway and that the memorandum of understanding on the Strait of Hormuz expired without extension. In that scenario, energy-driven inflation is a direct headwind for the Fed and, consequently, for XAU/USD: rising oil pushes inflation up, higher inflation forces the central bank to keep rates higher for longer, and higher rates weigh on interest-free gold.

Yield dynamics

TD Securities warns that a "renewal of selling pressure" may still not materialize even as recent buying momentum in the metal weakens. ING Bank reminds that rising Treasury yields raise the opportunity cost of holding a non-coupon asset — a classic form of monetary tightening for gold.

Still, the long end of the curve is increasingly worrying the market. Bondholders fear governments will struggle with spending; the budget deficit and the opacity around new Fed chair Kevin Warsh add to the nerves. The 30-year yield at a 19-year peak reflects both the Iran conflict and a debt?hungry technology sector borrowing heavily amid the AI boom.

Many analysts see the sell-off as something more fundamental — an economy that stubbornly refuses to slow even with rates that once seemed high. If the 2008 crisis began an era of very low rates, the current reversal could be a return toward a previous norm where money is expensive again.

Saxo Bank even allows for a scenario in which the unusual backdrop — rising yields alongside rising gold — becomes the new normal: the historical inverse relationship between these assets appears to be weakening before the market's eyes.

So, the fate of gold in the coming days will be decided not on the physical market but in the July FOMC minutes and Kevin Warsh's speech at Jackson Hole. Will $4,400 hold if Treasury yields resume their advance?

Technically, on the daily chart, XAU/USD faces the risk of forming a 1-2-3 reversal pattern. A drop below $4,310 would be a sell signal. As long as gold remains above that level, buying is the relevant tactic.