The momentum in gold's recent rally has lost much of its shine, with the precious metal unable to reach new record highs since Aug. 20, as U.S. Treasury yields stabilize and the dollar rebounds.

On Wednesday, gold traded at $2,505 per ounce, down 0.8% for the day, poised to break a three-session winning streak.

The dollar's recent surge, driven by positive catalysts, appears to be fading, prompting traders to take profits and reduce exposure to gold.

Rate-cut expectations have not seen significant improvement, with speculators fully pricing in a September rate cut but assigning a 65% probability to a smaller 25-basis-point reduction, compared to 35% for a 50-basis-point cut, according to the CME FedWatch tool.

As the Federal Reserve's rate cut expectations remained largely unchanged, Treasury yields stabilized, with the 10-year yield trading at 3.83% on Wednesday. Despite falling 67 basis points since early July, the yield hasn't dropped below 3.75% since earlier this month, when a volatility event caused wild swings in equity and fixed income markets.

Geopolitical tensions in the Middle East, which have historically boosted safe-haven assets like gold, did not escalate into a broader conflict after recent exchanges between Israel and Hezbollah. This de-escalation has further diminished gold's appeal.

The U.S. dollar index (DXY) was up 0.4% Wednesday, after closing Tuesday at the lowest levels since July 2023.

Wednesday's Pullbacks In Gold Mining Stocks

The dip in gold prices has led to a more significant decline in gold mining stocks. The VanEck Gold Miners ETF (NYSE:GDX) and the VanEck Junior Gold Miners ETF (NYSE:GDXJ) both fell by 2.5%.

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Image created using artificial intelligence via Midjourney.