Gold remains stuck near $4,000 an ounce after a 6% September slide, pinned down by a stronger dollar, rising Treasury yields and oil prices that refuse to retreat. Central banks keep buying the dip, and the LBMA sees the metal climbing toward $5,013 within a year.
Gold has failed to recover from a rough September, when the price fell 6% against a backdrop of a Fed rate hike and a strengthening dollar. Long-term Treasury yields surged to 24-year highs over the same stretch, and oil's refusal to fall, despite reports of resumed Middle East exports, adds a further drag on the metal.
Oil and inflation keep the Fed hawkish
High energy prices signal that inflationary pressures remain, pushing the Fed toward a hawkish stance that works against gold. Renewed attacks by Iran on tankers in the Strait of Hormuz, and by Yemeni Houthis on Saudi oil infrastructure, have pushed Brent back above $100 a barrel, triggering another sell-off across risk assets. According to Kpler, oil flows through the Strait of Hormuz have fallen from 91% to 74% of pre-war levels.
Investors also remain uncertain whether the Fed will tighten policy in October or wait until December. CME futures put the odds of an October hike at 22% and a December hike at 85%, while FOMC officials voice conflicting views. As a result, investors are playing it safe ahead of the September meeting minutes, hoping for clarity on the central bank's stance.
Central banks keep buying the dip
While the broader market sells, central banks see an opportunity to buy. In September, China added 740,000 ounces to its gold reserves, marking its 23rd consecutive month of accumulation. The LBMA says central bank activity, combined with mounting fiscal challenges and persistently high geopolitical risks, will drive gold to $5,013 per ounce within 12 months.
The energy crisis, persistent inflation and bond yields at 24-year highs are creating a strong headwind for precious metals, the LBMA noted. Still, gold holding above $4,000 an ounce points to strong underlying demand for the physical asset.
Source: ActionForex
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