International spot gold came under clear pressure this week, weighed down by rising U.S. real yields, a strengthening U.S. dollar index, and hawkish policy expectations from major central banks, with prices at one point breaking below the $4,300 per ounce mark.
In Asian trading on Friday (September 25), spot gold fluctuated below $4,300 and was last trading at $4,275 per ounce, posting a weekly decline of about 2.5%.
Market attention is focused on the Federal Reserve's subsequent rate path, high-level U.S.-China interactions, and the evolution of geopolitical risks. While short-term volatility has intensified, long-term structural support factors are still being emphasized by multiple institutions.
Short-Term Pressure: Double Squeeze from Yields and the Dollar
This week's gold price action was highly correlated with the macroeconomic rate environment. The U.S. 10-year Treasury yield rose to near 5.11%-5.21%, hitting a multi-year high and reinforcing the opportunity cost of holding gold. The dollar index simultaneously climbed above the 101 mark, reaching a nearly two-month high.
Stronger-than-expected private-sector data further boosted market pricing for another Fed rate hike in October, with the probability rising from about 55% to around 70%.
Ashish Rajodiya, head of commodities at PL Capital, noted that remarks by the Iranian president at the United Nations General Assembly injected additional geopolitical uncertainty into the market, even though rate expectations themselves had already weighed on gold prices.
At the same time, news of a meeting between Chinese and U.S. leaders and an extension of the trade truce somewhat eased some safe-haven sentiment, but failed to fully offset the drag from interest rates and exchange rates.
Jateen Trivedi, vice president of commodity and currency research at LKP Securities, said rising yields and a stronger dollar have pushed domestic Indian gold prices down by about 1,000 rupees, with the short-term trading range likely falling between 148,000 and 152,500 rupees per 10 grams.
After a significant pullback in the previous trading session, spot gold continued to trade below $4,300. With technical and fundamental factors reinforcing each other, the market's direction ahead still depends on upcoming U.S. employment and inflation data.
If the data remain strong, gold prices may further test the $4,200 support level; if the labor market shows signs of cooling or Middle East tensions ease again, buying interest could quickly return.
Institutional View: Range-Bound Trading Coexists with Long-Term Upside
Despite near-term pressure, several institutions remain relatively optimistic about gold's medium- and long-term prospects. Elara Securities expects gold prices to trade in a range of $4,200-$4,700 per ounce for the remainder of 2026. As central banks slow the pace of tightening, prices could rise further to $5,000-$5,200 by the end of 2027.
The institution's report noted that after falling about 26% from its 2026 high, gold has rebounded about 8.4% from its yearly low. Structural factors including rising U.S. fiscal risks, the relatively diminished safe-haven appeal of U.S. Treasuries, changes in the sanctions environment, and continued retail and central bank demand from China all support the long-term thesis.
Central bank gold purchases are still viewed as strategic reserve allocation rather than short-term tactical operations. So far this year, reported global central bank gold purchases total about 130 tonnes, down from 160 tonnes in the same period last year, but as of the second quarter, 45% of central banks had increased their gold reserves year over year, significantly higher than 32% at the end of 2021. A price pullback is expected to further stimulate official demand.
Elara's model shows that for every 100 basis point year-over-year rise in the dollar index, gold prices tend to fall by about 130 basis points. Meanwhile, the correlation between Brent crude oil and gold has shifted from positive 10% in 2010-2019 to negative 31% recently. If Middle East tensions ease, falling oil prices would help lower real interest rates, thereby supporting gold prices, though monetary policy may still limit upside room. Over the next two to three quarters, gold prices may exhibit more range-bound characteristics.
Chief research officer Rainisha Chainani provided a relatively clear trading range, stating that spot gold is moving within the $4,250-$4,450 range, with the overall trend still leaning bullish. Investors can position on dips near support and trim moderately near resistance.
Key Drivers and Risk Balance
Overall, short-term gold prices are dominated by real interest rates and the dollar, and volatility may continue to expand. The Fed's policy path, U.S. data performance, and developments in the Gulf region will be core focal points in the coming weeks. On a longer horizon, continued central bank reserve diversification, fiscal sustainability concerns, and geopolitical uncertainty form an important floor for prices.
Investors need to distinguish between tactical adjustments and strategic allocation, avoiding excessive chasing of rallies or panic selling during periods dominated by a single macroeconomic variable.
Editor's Summary
The current gold market presents a typical "near-term pressure, long-term support" pattern. Rising U.S. real yields and a stronger dollar directly increase holding costs, driving a clear weekly pullback; at the same time, central bank gold purchases, reserve diversification, and fiscal and sanctions-related risks continue to provide a structural foundation for medium- and long-term prices.
Institutions generally expect range-bound trading over the next two to three quarters, with further upside possible around 2027 as tightening slows. Market participants should closely track changes in rate pricing and geopolitical events, seizing allocation rhythm amid volatility rather than relying solely on short-term directional judgments.
Frequently Asked Questions
Q: Why did gold prices fall significantly this week?
A: Mainly due to the dual impact of rising U.S. real yields and a strengthening dollar index. The 10-year Treasury yield near 5.11%-5.21% has raised the opportunity cost of holding gold; the dollar index above 101 has also weighed on dollar-denominated gold. At the same time, the market's increased probability pricing for a Fed rate hike in October further reinforced this trend.
Q: How do analysts view gold's trajectory in 2026-2027?
A: Institutions such as Elara expect gold prices to trade in the $4,200-$4,700 range for the remainder of 2026, with potential to rise to $5,000-$5,200 by the end of 2027. Short-term constraints from hawkish policy and high real rates may lead to range-bound trading; longer term, support comes from central bank gold purchases, reserve diversification, and U.S. fiscal risks.
Q: What impact do central bank gold purchases have on gold prices?
A: Global central banks view gold as a strategic reserve asset free from sanctions and with zero counterparty risk. Reported purchases so far this year total about 130 tonnes, with 45% of central banks increasing reserves year over year. Willingness to buy tends to strengthen when prices fall, providing a solid demand floor for gold, especially significant in long-term allocation logic.
Q: How will high-level U.S.-China interactions affect gold prices?
A: News of the meeting and the extension of the trade truce helps ease some safe-haven sentiment and trade uncertainty, providing some support for gold prices. However, if negotiations make limited progress or subsequent reversals occur, geopolitical and policy risks could still periodically drive up safe-haven demand.
Q: How should investors respond to current gold price volatility in the short term?
A: Pay attention to U.S. employment data to be released next week. If data remain strong, gold prices may test the $4,200 support level; if cooling appears or geopolitical risks ease, buying interest may return. Investors can reference the $4,250-$4,450 trading range, positioning on dips near support while strictly controlling positions and distinguishing between short-term fluctuations and long-term allocation needs.
As of 14:41 Beijing time, spot gold was last reported at $4,276.89 per ounce.
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