The fact gold has been falling while inflation expectations have been going up is worrying and most likely due to the market expecting even higher yields and dollar. A belief that in recent weeks has negatively impacted the otherwise firm inverse correlation between the yellow metal and US 10-year real yields. The rise in nominal bond yields, that accelerated in early January has up until now primarily been driven by rising inflation expectations with rising breakeven yields explaining most of the rise in nominal yields (chart below).
Gold likes inflation but having been in a falling yield environment for many months, the metal now needs to find a defense, especially if real yields continue to rise from the -1% level it has been anchored around for a while now.
However, as yields start to climb, the market will increasingly return to a discussion about whether the Federal Reserve may introduce measures to brake or curb a further yield rise. Yield-curve control, if implemented, could be a game changer for gold as real yields are likely to plummet as inflation continues to rise, and the dollar would weaken. However, in order to get to that point, yields need to rise even further and during that time gold may suffer further losses.