Gold Dips as ETF Outflows and Rate Uncertainty Weigh on Prices
Physical gold-backed exchange-traded funds (ETFs) saw net outflows last week for the first time since mid-July, marking an end to a period of consistent inflows that had supported gold's demand. According to World Gold Council data reported by Reuters, inflows and outflows were nearly balanced during this shift. Spot gold prices dropped to $4,129.01 an ounce on Monday, a 0.4% decline from the previous week's close, though they later rebounded slightly to $4,143.62 as investors analyzed recent US economic data.
The withdrawal from ETF holdings highlights the market's focus on Federal Reserve policy. Since the Fed's last rate hike about a month ago, gold has lost 6.8% of its value. Rising US Treasury yields and a stronger dollar have added pressure, as non-yielding assets like bullion typically struggle when fixed-income returns increase. Oil prices have further complicated the situation, with climbing energy costs overshadowing earlier support from softer US inflation readings. This surge in oil prices has raised inflation expectations and reinforced market expectations for Fed rate hikes.
A weaker US labor market report provided some relief. The Bureau of Labor Statistics reported only 29,000 jobs added in September, with the unemployment rate rising to 4.2%. Revisions also reduced employment figures for the prior two months by 60,000 positions. This softer data reduced the likelihood of a Fed rate hike in October, offering temporary support to gold. Additionally, Chinese gold premiums fell to zero ahead of a holiday week, temporarily slowing demand in a key Asian market. Supply-side developments included an agreement at Barrick Mining's Loulo-Gounkoto complex in Mali, averting planned strikes.
Investors are now watching two key dates: October 7, when the Fed will release the minutes from its September meeting, and October 14, when the Bureau of Labor Statistics will publish the September US consumer price index. The CPI report is expected to shape expectations for monetary policy through the autumn.