Gold prices climbed on Thursday, recovering from their weakest level since early August, as the US dollar retreated from an 18-month high. Spot gold rose roughly 0.7% to $4,141.09 an ounce, while December futures advanced to around $4,165.
The bounce provides some relief after a sharp selloff driven by rising Treasury yields and a stronger dollar, but it does not yet confirm the correction is over. Market participants are closely watching $4,275, a level that Pepperstone identifies as the threshold for a more constructive near-term outlook.
With the Federal Reserve still leaning toward another rate increase this year, gold may need more than a softer dollar to rebuild momentum. The dollar index eased from Wednesday's peak near 102.5, removing one of the metal's most immediate headwinds. A weaker US currency makes dollar-priced bullion cheaper for overseas buyers and can quickly improve short-term demand.
ANZ Research analysts noted that rising bond yields and a stronger dollar were the primary drivers of gold's recent weakness. They also argued that continued central-bank demand, particularly from China, should help limit downside. That support is becoming more visible: China's central bank increased its gold holdings again in September, extending its buying streak to 23 consecutive months. The World Gold Council also reported $10 billion of global gold ETF inflows in September, lifting holdings by 67 tonnes to a record 4,256 tonnes despite the monthly price decline.
Fed policy remains a hurdle
The bigger challenge for gold is interest rates. Minutes from the Fed's September meeting showed that most officials still considered another rate increase likely before year-end, even though policymakers disagreed over whether September's hike was mainly insurance against supply-driven inflation or a response to stronger demand. Markets price only about an 18% chance of another increase in October but roughly an 80% probability by December.
The US 10-year Treasury yield remains around 5.3%, leaving the opportunity cost of holding non-yielding gold unusually high. Phillip Nova analyst Priyanka Sachdeva told Barron's that gold's structural drivers remain intact, but the metal is still vulnerable to swings in Treasury yields, oil prices, and inflation expectations. She identified the $4,000 area as an important longer-term level where conviction buying could return.
Why $4,275 matters
The first real test for bulls is now $4,275. Pepperstone head of research Chris Weston said that gold remains a seller's market until it clears that level. The significance is straightforward: $4,275 would take bullion back above the zone where recent rallies have repeatedly failed and weaken the short-term pattern of lower highs.
A move from $4,141 to $4,275 requires only about a 3.2% gain, but the macro backdrop must cooperate. A softer dollar and easing long-end yields could make that achievable. Another rise in oil, inflation expectations, or Treasury yields would probably keep rallies contained.
This article is for informational purposes only and does not constitute financial advice.
