$4,000 Gold Barrier Proves Resilient Despite Strong Dollar and High Yields

Gold prices have fallen for the second week in a row as a strong dollar and high US Treasury yields weigh on bullion, yet the market is resisting turning $4,000 into a sustained breakdown. Spot gold traded around $4,184 an ounce in Asian hours and was down over 2% for the week after touching a seven-week low near $4,110 on Monday.

The dollar's firmness increases gold's cost for overseas buyers, while Treasury yields above 5% provide investors with an attractive return from government debt. Gold pays no income. The Fed threat has eased, however, with markets assigning only about 28% probability to an October rate increase, down from roughly 70% earlier this week.

The reason gold has been difficult to break may lie in the demand underneath the market. US-listed gold ETFs attracted around $3.8 billion in September after taking in $7.9 billion during August. Globally, gold-backed ETFs added $18 billion in August, the second-largest monthly inflow on record.

Official-sector demand is providing another layer of support. China's central bank bought 20.2 tonnes in August, its largest monthly addition since October 2023 and its 22nd consecutive month of purchases. That persistent demand means sellers have repeatedly found buyers as gold approaches the psychological $4,000 mark.