The Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) price index — the Federal Reserve preferred inflation gauge — rose 2.3% year-over-year in July 2025, down from 2.4% in June and marking the lowest reading since March 2021. Core PCE, which excludes food and energy, came in at 2.5%, below the 2.6% consensus estimate.
The bond market reaction was decisive. The 10-year Treasury yield fell 7 basis points to 3.80%, while the 10-year TIPS (inflation-protected) yield dropped to 1.48%, extending its decline from the 2024 peak of 2.45%. The real yield decline directly reduces the opportunity cost of holding non-yielding gold, and the correlation between real yields and gold prices has been striking over the past 18 months.
The PCE report also showed services inflation moderating, with housing services PCE rising at the slowest pace since December 2022. This is particularly significant because shelter has been the stickiest component. Gold prices gained $28 on the day, closing at $2,518, and have now posted positive returns in 9 of the past 11 PCE release days.
