Gold Holds Ground at $4000 as Underlying Demand Supports Prices

Gold prices are headed for their second consecutive weekly decline as a strong dollar and historically high US Treasury yields put pressure on bullion. Despite this, gold has refused to break below $4,000, with some analysts attributing its resilience to underlying demand.

The US-listed Gold ETFs attracted $3.8 billion in September, building on the $7.9 billion inflow in August. Globally, gold-backed ETFs added a record $18 billion in August, with holdings rising by 121 tonnes to a new high of 4,189 tonnes.

China's central bank has been a steady buyer, purchasing 20.2 tonnes in August, its largest monthly addition since October 2023 and its 22nd consecutive month of purchases. This persistent demand has provided a support level for gold, with the near-term pressure from interest rate hikes easing as Fed hike odds collapse to around 28%.

However, a strong dollar driven by high Treasury yields remains a key headwind for gold. If October's payrolls report shows robust employment growth and wages, it could push yields back towards their highs and reignite the selloff in gold.