$4,000 Support Holds for Now Despite Weakening Gold Prices
Gold prices are heading for their second consecutive weekly decline as a firm dollar and high US Treasury yields continue to put pressure on bullion. Despite this, gold is refusing to break below $4,000, a level that has proven stubbornly resilient.
The market's resistance to falling below $4,000 can be attributed in part to strong demand for gold, which has been driven by inflows into US-listed gold ETFs and record holdings of global gold-backed ETFs. In September, US gold ETFs attracted around $3.8 billion in new investment, while globally, gold-backed ETFs added a record 121 tonnes in August.
Another layer of demand is coming from official-sector buyers, including China's central bank, which has made its largest monthly purchase since October 2023, adding 20.2 tonnes to its reserves in August. This persistent buying activity has provided support for gold prices, with sellers repeatedly finding buyers as the market approaches the $4,000 level.
However, analysts at Bank of America are questioning how durable this support will be, forecasting that prices could fall towards $3,750 in the fourth quarter if elevated energy costs keep inflation and yields high. They also warn that positioning could unwind quickly if investors lose confidence in the longer-term bullish case for gold.