The U.S. PCE inflation rate held at 2.6% year-over-year in July—right in line with consensus—while core PCE edged to 2.9% y/y and 0.3% m/m. For gold, the next leg is less about the headline print and more about real yields and the dollar: as policy-rate cut odds rise and the curve toys with steepening, bullion’s macro tailwinds can persist even if inflation itself isn’t re-accelerating. (Bureau of Economic Analysis, MarketWatch, Reuters)
Data box: what the July report said
- Headline PCE (y/y): 2.6%, unchanged from June.
- Headline PCE (m/m): 0.2%.
- Core PCE (y/y): 2.9%, a notch firmer.
- Core PCE (m/m): 0.3%.
- Personal spending (m/m): +0.5%, strongest in four months.
These are the official figures from the Bureau of Economic Analysis; the agency also confirmed the next Personal Income & Outlays release (with August PCE) is scheduled for Friday, September 26, 2025. (Bureau of Economic Analysis)
Why it matters for gold: PCE doesn’t move bullion because “inflation = buy gold.” It moves gold because the Fed’s reaction function—via policy-rate expectations, the dollar, and real yields—responds to inflation’s trend and composition. A steady 2.6% headline with stickier core gives the Fed cover to start but not rush cuts, leaning supportive for gold if real yields soften and the dollar stays on the back foot. (Reuters)
Real yields & DXY snapshot: the two levers that matter most
- 10-year TIPS (real) yield: around ~1.9% in late August by FRED’s daily series—off midsummer highs, but still positive. The lower this goes, the lower the opportunity cost of holding a zero-yield asset like gold. (FRED)
- Nominal Treasuries: the 2-year fell toward ~3.68% post-Jackson Hole headlines; the 10-year hovered near ~4.26%, a mild bull steepener day-to-day. That pattern is typically gold-friendly, provided the long end doesn’t lurch higher on term premium. (Reuters)
- Dollar (DXY): broadly softer in August, with a ~2% monthly drop as September cut odds rose; spot readings around ~97.9–98.1 on Aug. 28–29. A weaker dollar boosts non-USD gold demand mechanically. (Reuters, Yahoo Finance)
Read-through: A gentle down-trend in real yields plus a dollar that’s slipping tends to keep the bid under bullion, even if core inflation is sticky. The risk for gold would be a bear steepener (long yields up on term premium or supply) that pushes real long rates higher without a firm growth scare. (Reuters)
Where the money went: gold ETPs vs gold miners
Physically-backed gold ETFs: July saw another inflow month. The World Gold Council tallied US$3.2bn of net inflows, with North America (~$1.4bn) and Europe (~$1.8bn) doing the heavy lifting; global AUM rose to $386bn and holdings to 3,639t—the highest month-end total since 2022. That’s consistent with a year in which physically-backed funds had already added $38bn in H1. (World Gold Council, Reuters)
Gold miners funds: Flows into precious-metals sector funds picked up into late August; LSEG Lipper data show about $0.56bn in the week to Aug. 27 as gold prices pressed higher. Miners ETFs like GDX have rallied sharply from 2024 lows and sit near 52-week highs, but flows remain choppier than bullion ETPs given earnings sensitivity to costs and grades. (Reuters)
Spot & futures tone: Multiple day-of PCE wraps had spot gold near $3,420–$3,435/oz, with Dec futures up ~0.7% and open interest rising—signs of additive rather than purely short-covering demand. (Reuters, AP News)
Scenario grid: how a “cut soon vs later” path feeds into gold
1) Cut in September, guidance still cautious (base case).
- Rates/OIS: 25 bps in September; a second 25 bps tentatively priced for December.
- Real yields: Drift lower at the front end; long real rates stable to slightly softer.
- Dollar: Eases if the Fed’s path undercuts the global carry advantage.
- Gold: Supportive—carry cost drops, USD headwind fades. Near-term consolidation likely after a strong August, but macro underpinnings remain. (Reuters)
2) Cut delayed to November/December (hawkish patience).
- Rates/OIS: Market rolls forward cut odds if core services stay sticky.
- Real yields: Rebound at the front end; long end could bear-steepen on term premium/issuance.
- Dollar: Firms on carry and relative policy stance.
- Gold: Choppy—macro bid weakens short-term; the floor depends on growth data and risk appetite. (Reuters)
3) Faster relief: weak labor data forces a dovish glide-path.
- Rates/OIS: September and December gets priced with higher confidence; 2026 path steepens.
- Real yields: Come in across the curve.
- Dollar: Slips further.
- Gold: Constructive—especially if risk-off joins the rate impulse (flight-to-quality + lower reals). (Reuters)
What flips the script negatively for gold? A durable rise in real long rates—for example, from supply-driven term premium or a perception that the Fed’s easing risks re-heating inflation—would be the cleanest headwind. (Reuters)
Positioning, miners vs metal, and the “carry” debate
- Futures positioning: The WGC notes total net longs on COMEX up ~12% m/m in July, with money managers rebuilding length after spring profit-taking. That suggests capacity for additional length if front-end real yields keep easing. (World Gold Council)
- ETPs vs miners: Gold ETPs have been the cleaner macro hedge; miners add operating and cost leverage (energy, labor, sustaining capex). In past easing cycles, miners can outperform bullion once the rate path is credible and input costs stabilize—but they can lag if the long end sells off or if risk appetite falters. Recent late-August inflows into precious-metals sector funds signal growing risk-on interest in miners alongside bullion. (Reuters)
Today’s market read: “sticky-ish” core, steady gold
- Price action: Into and after the July report, spot gold hovered in the $3,420s–$3,430s, leaving August on track to be one of the best months since April. The message from tape and flows: investors see a high-probability first cut, but don’t expect the Fed to abandon caution. (Reuters)
- Macro bridge: If headline PCE sits at 2.6% and core at 2.9%, the path of real yields—not the price index itself—remains the critical variable for bullion. As long as real yields don’t march higher, the cost of carry for gold continues to fall on a forward basis. (Bureau of Economic Analysis)
What to watch next (and why it matters)
- Next PCE print — Friday, Sept. 26, 2025.
That August report will tell us whether core disinflation resumes or stalls. A softer core would cement a second 2025 cut; a firm core keeps the Fed “meeting by meeting.” Either way, the rate path is the gold driver. (Bureau of Economic Analysis) - Real-yield gauges (10-year TIPS via FRED/Treasury).
Daily real yields around ~1.9% have been the fulcrum. A push toward 1.5% would be a material positive for bullion; a break above 2.0% is the cleanest headwind. (FRED) - Dollar (DXY) trend.
The ~2% August drop reflected rising cut odds and Fed-independence worries. If the Fed under-delivers relative to peers, the dollar can re-firm—usually negative for gold at the margin. (Reuters) - Gold ETF flows (WGC monthly/weekly).
July’s $3.2bn inflow and record AUM show the macro allocation bid is alive. Sustained inflows into September would validate the rates/dollar narrative. (World Gold Council) - Miners’ fund flows and margins.
Sector-fund inflows (~$0.56bn in the latest week) point to a beta chase. For durability, watch Q3 updates on all-in sustaining costs and grade mix; inflation in diesel and labor can sap operating leverage even if bullion rallies. (Reuters)
Bottom line
July’s PCE report did not deliver a dovish shock—it validated the market’s working assumption: a September cut is likely, but the Fed will tread carefully while core stays above target. In that environment, real yields and the dollar are still leaning gold’s way. Add in steady ETF inflows and rising open interest, and the macro bid under bullion remains intact—subject to one big caveat: if long real rates climb on term-premium worries or supply, the tailwind fades quickly. For now, the balance of risks still tilts supportive for bullion more than for inflation-sensitive cyclicals. (Reuters, AP News)
Sources
- BEA – Personal Income & Outlays (July 2025): headline PCE 2.6% y/y, 0.2% m/m; core PCE 0.3% m/m; next release Sept. 26. (Bureau of Economic Analysis)
- Market reaction/levels: Reuters gold wraps and dollar/yield updates; DXY monthly move, 2s/10s context. (Reuters)
- Real yields: FRED DFII10 (10-yr TIPS). (FRED)
- Gold ETP flows: World Gold Council — July 2025 (+$3.2bn, AUM $386bn, 3,639t). (World Gold Council)
- Sector funds/miners: LSEG Lipper weekly flows into gold & precious metals sector funds (~$556m w/e Aug. 27); GDX reference levels. (Reuters)
Educational disclosure
This article is for general informational and educational purposes only and does not constitute investment, financial, legal, or tax advice. Markets and macro data are revised frequently—please verify key facts and figures directly from the cited primary sources (BEA, FRED/Treasury, World Gold Council, and recognized newswires) before relying on them. We do not recommend buying, selling, or using any specific security, instrument, or strategy. If you need advice tailored to your circumstances, consult a licensed professional in your jurisdiction.