Gold Prices Slide as Treasury Yields and Dollar Strength Persist
Gold prices faced sustained pressure on Monday, despite a significant drop in expectations for a Federal Reserve rate hike in October. Treasury yields remained near multi-decade highs, and a weaker Euro bolstered the US Dollar, contributing to gold's decline. Spot gold fell 0.9% to $4153 per ounce, marking its sixth consecutive weekly drop and erasing August's gains. The latest CFTC data revealed that money managers reduced their net bullish positioning in Comex gold futures and options for the fifth week in a row.
The probability of an October rate hike plummeted to just above 20%, down from over 70% a week earlier, though the likelihood of at least one hike by December remains above 80%. US 10-year Treasury yields stayed near their highest levels since 2002. French fiscal concerns kept the spread between French and German 10-year yields around 145 basis points, close to levels last seen during the Eurozone debt crisis in 2011. The Euro hit a 17-month low against the Dollar, lifting the Dollar index to its highest since April 2025.
Jeff Toshima, former Tokyo director of the World Gold Council, noted that gold's price action was concerning, as it plunged nearly $100 despite receding expectations of a Fed rate hike. He expects strong buying interest from central banks and long-term investors on dips toward $4000. Meanwhile, speculative Managed Money net longs in Comex gold futures and options fell for a fifth consecutive week to 386.98 tonnes as of Tuesday, 29 September, though net bullish positioning remained 5.6% above its trailing five-year average.
Derivatives platform Saxo Bank's commodity strategist Ole Hansen highlighted a notable divergence: hedge funds cut 2.7 million ounces of exposure during September, while ETF investors added 1.7 million ounces, lifting holdings to a four-year high. Holdings in SPDR Gold Shares (GLD) and iShares Gold Trust (IAU) increased last week, despite some outflows on Friday. Brent crude futures edged up 0.3% to $102.58 per barrel on Monday, as concerns over Middle East supply disruptions offset rising crude exports from the region.