Following a decline that began in late August
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Written by Linh Tran, Market Analyst at XS
Following a decline that began in late August, gold has been trading sideways within a range o– $4,060–$4,230 per ounce since early October. Selling pressure has eased somewhat, but current buying interest remains insufficient to establish a new direction.
The market is finding a balance between demand for gold accumulation and pressure from high interest rates. The pause in the decline is therefore noteworthy, but it is not enough to conclude that the outlook has turned positive.
Gold’s stabilization has been supported primarily by the recent easing in U.S. Treasury yields. The 10-year yield has now fallen to around 5.12%, while the real yield of the same maturity has retreated to approximately 2.77%. Although these declines are modest, they have somewhat reduced the opportunity cost of holding gold, allowing buying interest to return after the correction.
Meanwhile, ETF inflows indicate that demand for gold holdings has persisted during the downturn. According to the World Gold Council, global gold ETFs attracted approximately $10 billion in net inflows in September despite weaker gold prices, suggesting that some investors continued to increase their allocations to gold.
Howeve’, September’s data is not sufficient to confirm that buying interest has continued to support prices in October. I view this as an underlying supportive factor. To assess the potential for a recovery, further evidence of fresh inflows and easing real yields is needed.
It must also be acknowledged that pressures from inflation and the interest rate outlook remain unresolved. U.S. CPI rose 0.6% month-on-month in September, accelerating from August’s 0.4% increase and maintaining pressure on the Fed to tighten policy. Elevated inflation therefore remains a significant obstacle for the precious metal.
Against this backdrop, I lean toward continued consolidation in the near term, with the risk of renewed declines still warranting greater attention than the prospect of an immediate, sustained rally. This view rests on investment demand helping to stabilize the market, while real yields remain high and expectations of further Fed tightening persist. To change this assessment, inflation would need to cool sufficiently to reduce expectations of further rate hikes, alongside a more pronounced decline in real yields and the U.S. dollar.
The F’d’s Octobe– 27–28 meeting and the upcoming PCE report will help test this outlook. If the data and policy messaging ease concerns about further tightening, existing demand for accumulation could support a recovery in gold. Conversely, if inflation remains persistent and yields rise again, the current sideways phase may prove to be only a pause in the correction. In my view, the case for a more positive outlook must come from a change in the interest rate environment, rather than simply from prices having stopped falling.
Greetings, trust this email finds you well, please find below market co ment
Written by Linh Tran, Market Analyst at XS
Following a decline that began in late August, gold has been trading sideways within a range o– $4,060–$4,230 per ounce since early October. Selling pressure has eased somewhat, but current buying interest remains insufficient to establish a new direction.
The market is finding a balance between demand for gold accumulation and pressure from high interest rates. The pause in the decline is therefore noteworthy, but it is not enough to conclude that the outlook has turned positive.
Gold’s stabilization has been supported primarily by the recent easing in U.S. Treasury yields. The 10-year yield has now fallen to around 5.12%, while the real yield of the same maturity has retreated to approximately 2.77%. Although these declines are modest, they have somewhat reduced the opportunity cost of holding gold, allowing buying interest to return after the correction.
Meanwhile, ETF inflows indicate that demand for gold holdings has persisted during the downturn. According to the World Gold Council, global gold ETFs attracted approximately $10 billion in net inflows in September despite weaker gold prices, suggesting that some investors continued to increase their allocations to gold.
Howeve’, September’s data is not sufficient to confirm that buying interest has continued to support prices in October. I view this as an underlying supportive factor. To assess the potential for a recovery, further evidence of fresh inflows and easing real yields is needed.
It must also be acknowledged that pressures from inflation and the interest rate outlook remain unresolved. U.S. CPI rose 0.6% month-on-month in September, accelerating from August’s 0.4% increase and maintaining pressure on the Fed to tighten policy. Elevated inflation therefore remains a significant obstacle for the precious metal.
Against this backdrop, I lean toward continued consolidation in the near term, with the risk of renewed declines still warranting greater attention than the prospect of an immediate, sustained rally. This view rests on investment demand helping to stabilize the market, while real yields remain high and expectations of further Fed tightening persist. To change this assessment, inflation would need to cool sufficiently to reduce expectations of further rate hikes, alongside a more pronounced decline in real yields and the U.S. dollar.
The F’d’s Octobe– 27–28 meeting and the upcoming PCE report will help test this outlook. If the data and policy messaging ease concerns about further tightening, existing demand for accumulation could support a recovery in gold. Conversely, if inflation remains persistent and yields rise again, the current sideways phase may prove to be only a pause in the correction. In my view, the case for a more positive outlook must come from a change in the interest rate environment, rather than simply from prices having stopped falling.
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