On October 23, the international spot gold price dropped below the $4,000 per ounce mark for the first time since July. As of the reporter's deadline on October 25, international spot gold was quoted at $3,995.54 per ounce. Since October, the 10-year U.S. Treasury yield has hovered around 5%, and multiple foreign banks have raised their U.S. dollar deposit rates, with some term products offering annualized rates exceeding 4%. In response, Guotai Junan Futures analyzed that in a high-interest-rate environment, both U.S. Treasuries and the U.S. dollar offer safe-haven attributes alongside clear yields, while gold, as a zero-yield asset, has seen its opportunity cost of holding systematically elevated. This has shaped a pattern in which "the dollar and U.S. Treasuries strengthen in tandem, pressuring gold."
A research report from Everbright Futures indicated that uncertainties in the Middle East situation have resurfaced, financial market volatility has been repeated, and gold has broken below its consolidation range and resumed its downward trend. Currently, gold remains sensitive to the "oil price—inflation—interest rate" transmission chain, and rate hike expectations persist. Particularly as the Middle East situation shows no signs of easing, the market has increased its pricing of rate hike expectations.
"Since October, the precious metals sector as a whole has shown a pullback, but performance among different products has diverged, with one notable indicator being the significantly elevated gold-silver ratio," said Huang Jiaqi, a precious metals analyst at Zhuochuang Information, in an interview. Silver, like gold, possesses financial attributes, but silver's widespread application in downstream sectors such as photovoltaics, soldering, and alloys also exposes it to industrial supply and demand influences. Overall, Middle East tensions continue to cause disruptions, and international crude oil prices remain elevated, which in turn translates into global inflationary pressure. Although precious metals have certain inflation-hedging characteristics, in the short term the market's trading logic centers on expectations that the Federal Reserve will raise rates to suppress inflation. As interest rate levels rise, gold and silver, as non-interest-bearing assets, are adversely affected.
In contrast to the decline in international gold prices, central banks around the world continue to purchase gold. According to preliminary data from the World Gold Council, in September of this year, central bank gold purchases rose to the highest monthly level since November 2024. UBS Wealth Management believes that gold prices may once again test support near $4,000 per ounce in the short term, and structural demand from buying on dips is expected to form a bottom at that level. As the market downgrades its expectations for Federal Reserve rate hikes, gold prices are expected to regain momentum near the end of the year and extend into 2027. From a medium- to long-term perspective, industry insiders believe that the long-term logic of central bank gold purchases and global de-dollarization has not changed due to this round of decline.
Yu Zongliang, a fund manager at XingShi Investment, said in an interview that gold's long-term allocation value remains relatively high. The reason gold prices are currently suppressed is the relatively high U.S. Treasury yields and the Federal Reserve's "hawkish" stance exceeding the market's previous expectations. However, from a long-term perspective, America's core problem stems from fiscal deficits. Since many U.S. fiscal expenditures are rigid, it is difficult to expect the fiscal deficit to be compressed. As long as the U.S. fiscal deficit persists, long-term support for gold will continue to exist.
Southern Fund believes that whether gold prices can stabilize and rebound depends on whether U.S. inflation and employment data can continue to weaken, whether the pace of Federal Reserve rate hikes slows, and whether the dollar and U.S. Treasury yields can retreat from elevated levels. If these suppressing factors ease at the margin, gold prices may have room for recovery.
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