Pomegra
Gold fell to a two-month low near $4,100 as a stronger dollar and Treasury yields at their highest since 2002 weighed on bullion as Fed rate hike bets linger.
- Spot gold touched about $4,104 an ounce, its lowest since early August and roughly 20% below the February record of $5,120.
- The 10-year Treasury yield topped 5.3% and the 30-year reached 5.732%, both the highest since 2002.
- Markets price about an 80% chance of a December Fed rate hike, keeping real returns on cash and bonds ahead of non-yielding gold.
Lead
Gold extended its slide this week, touching about $4,104 an ounce in Asian trading on Thursday as a firm US dollar and surging Treasury yields eroded the appeal of the non-yielding metal. The decline marks the lowest level since August 5 and follows six straight weekly losses. The 10-year Treasury yield reached about 5.35% on Monday, the highest since 2002, while the 30-year yield touched 5.732% intraday. The dollar index hit a year-to-date high of 102.53 before easing toward 101.80.What Pushed Gold to a Two-Month Low?
A combination of rising yields, a stronger dollar and a hawkish Federal Reserve pushed gold lower. Spot gold fell more than 3% in a single session earlier in the week, dropping below $4,200 and through the $4,230 to $4,510 range that had held for much of the month.
The dollar index reached its strongest level since April 2025, and the euro slid to a 17-month low against the greenback. A stronger dollar makes gold more expensive for buyers holding other currencies, which dampens physical and investment demand outside the United States.
Minutes from the Federal Reserve's September meeting showed unanimous backing for that month's rate hike. Most officials judged another increase appropriate before year-end, a message reinforced by hawkish remarks from regional Fed officials. The relative strength index on gold sits near 37, close to oversold territory, with price below both the 100-day moving average near $4,265 and the middle Bollinger band near $4,250.
Why Are Treasury Yields Hurting Gold?
Higher Treasury yields hurt gold because bullion pays no interest, so every rise in real yields increases the opportunity cost of holding it. The 10-year yield moved from the mid-4% range into the 5.3% area, and the 30-year yield surpassed 5.7%, offering investors guaranteed returns not seen in over two decades.
The pressure is most acute in real, inflation-adjusted yields, which have climbed alongside nominal rates. That has pulled leveraged money out of the metal. Hedge funds and other managed-money accounts cut roughly 2.7 million ounces of gold exposure in September, and net long positions have fallen for five consecutive weeks to about 387 tonnes. That is still 5.6% above the five-year average, which suggests positioning has room to shrink further.
Rising interest rates also lift the return on cash and short-dated Treasury bills, widening the gap with an asset that generates no income.
How Are Investors and Central Banks Positioned?
Physical and institutional buyers are partly offsetting the selling. Exchange-traded holdings rose even as prices fell: the SPDR Gold Shares fund (GLD) added 1.1 tonnes in the latest session, and the iShares Gold Trust (IAU) added 0.6 tonnes to 463.54 tonnes, a four-year high.
The People's Bank of China extended its run of gold purchases to a 23rd consecutive month, adding 23 tonnes in September. Official-sector buying has been a structural support for the metal since 2022, and it continues to cap deeper drawdowns.
Silver has held up better than gold, trading near $61.68 an ounce. Brent crude stands near $102.58 a barrel, a level that keeps inflation concerns alive and strengthens the case for further tightening.
Market Reaction
Gold has rebounded intermittently from its lows as yields and the dollar pulled back from their peaks. The 10-year yield eased to about 5.27% after Monday's high, and the dollar index retreated from its year-high. Those pauses have produced short-lived bounces rather than a reversal.
Key technical levels are now in focus. Support sits at about $4,070, the lower Bollinger band, with the $4,000 round number below it. Resistance lies at $4,250 and $4,265, followed by the upper band near $4,425.
What Comes Next for Gold and the Fed?
The path for gold depends on how quickly markets reprice the Fed's next moves. The odds of an October hike have dropped to just above 20%, from over 70% a week earlier, and the central bank is expected to hold at that meeting. Markets still assign roughly a 78% to 80% probability to an increase by December.
Two scenarios define the near-term outlook. If inflation data soften and yields retreat from 2002 highs, gold's real-rate headwind eases and ETF and central bank demand could stabilize prices above $4,000. If the dollar extends its advance and the Fed signals a faster pace, a test of the $4,000 level becomes likely.
Outlook
Gold is trading about 20% below its February record as the strongest dollar since April 2025 and the highest Treasury yields in more than two decades reduce its relative appeal. Central bank buying and rising ETF holdings provide a floor, but the direction of Fed policy and real yields will set the pace. The next catalysts are US inflation data and the Fed's October and December meetings.
Mentioned tickers: GLD, IAU
