Gold Retreats as Dollar Strength and Rate Worries Overshadow Record ETF Inflows
Published on 10/07/2026 at 10:40 | Editorial boerse-global.de
Gold prices came under renewed pressure midweek, with the spot price quoted at USD 4,133.31 per troy ounce, a daily loss of 0.7%. A firmer US dollar and lingering concerns about the trajectory of Federal Reserve policy weighed on sentiment, even as physical demand from central banks and geopolitical risk provided a partial cushion.
The metal's recent weakness follows an extraordinary September that the World Gold Council described as exceptional. Despite global gold ETFs attracting inflows exceeding 70 tonnes during the month, the dollar price of gold fell by more than eight percent. The World Gold Council attributes this divergence primarily to derivatives markets, where speculative funds sharply reduced their exposure on the COMEX. The Managed Money category shed positions equivalent to 84 tonnes, while the Spreading category contracted by as much as 156 tonnes. These substantial repositioning moves in futures markets completely overshadowed buying interest in physically backed investment products.
Bond Market Pressures and Shifting Rate Expectations
The recent selling pressure came after ten- and thirty-year US Treasury yields had touched 24-year highs earlier in the week. Tuesday brought some relief: falling US bond yields and a dollar retreating from its one-year peak helped gold close 0.6% higher at USD 4,164.04 per troy ounce. According to Reuters, demand was further supported by a heightened search for safety as investors eyed tensions in the French bond market alongside concerns about US government debt.
Fundamental support arrived in the form of US labour market data. The US Department of Labor reported a gain of just 29,000 non-farm payrolls for September, well short of the 90,000 new positions that economists surveyed by Reuters had expected on average. The significant miss fuelled doubts about further rate hikes and provided temporary relief to the quotation, though it could not immediately neutralise the preceding rate-driven pressure in capital markets.
Should investors sell immediately? Or is it worth buying Gold?
Robust US economic data and rising government bond yields remain a key headwind. The latest ISM services purchasing managers' index showed that input price pressure in September reached its highest level in more than four years. This development is stoking market fears of inflation that could remain elevated into 2027. For the yield-free precious metal, this environment presents a challenge. Although the recent cooling in the US labour market dampened bets on an immediate rate move this autumn, futures markets continue to price a further tightening by year-end with a probability of 87%, according to Reuters. Higher government bond yields increase the opportunity cost of holding gold.
Central Banks and Geopolitics Provide a Floor
Geopolitical tensions are preventing sharper price declines. Media reports of attacks on oil tankers in the Strait of Hormuz have created fresh uncertainty about potential supply disruptions. Kyle Rodda of Capital.com noted yesterday that the situation in the Middle East could serve as a catalyst for a price breakout at any time. Giovanni Staunovo of UBS additionally described rising US government debt as a long-term structural support for gold.
Physical demand from central banks is also absorbing supply. According to World Gold Council data, global central bank purchases totalled a net 39 tonnes in August. China led the group of buyers, while Poland and Uzbekistan also continued to build up their currency reserves.
Shifting Trade Flows and Supply Developments
Distinct regional shifts are also emerging in physical trade. According to Reuters, Swiss gold exports jumped 65% in late summer compared with the previous month. While shipments to the United Kingdom and China increased significantly, demand from India collapsed. The reasons cited for Indian reticence were high prices and an abundant supply of recycled scrap gold. On the mining side, the situation in Mali eased after Barrick Mining reached an agreement with unions at the Loulo-Gounkoto complex, averting strikes.
What Traders Are Watching
Market participants are now turning their attention to the Federal Reserve. On Wednesday, the central bank releases the minutes of its most recent rate-setting meeting. Traders will scrutinise the document for clear signals on the rate path ahead of the upcoming decision at the end of October. Further directional cues are expected from the CFTC's Commitments of Traders report due Friday and US consumer price data scheduled for release on 14 October.
In the medium-term picture, the precious metal remains below its 50-day moving average, with a discount of 4.1%. At a distance of 26% from its 52-week high, gold remains trapped in a consolidation phase for now.
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