Gold Resilient Despite Firm Dollar and High Yields
Gold prices have declined for a second consecutive week, with spot gold trading around $4,184 an ounce in Asian hours. The market has been under pressure from a firm dollar and high US Treasury yields, which provide investors with attractive returns from government debt. However, despite these headwinds, gold is proving resilient.
The demand for gold remains strong, with US-listed gold ETFs attracting $3.8 billion in September, while globally, gold-backed ETFs added a record 121 tonnes to their holdings in August. China's central bank has also been buying gold, purchasing 20.2 tonnes in August, marking its 22nd consecutive month of purchases.
The reason gold is struggling to break below $4,000 may lie in the demand underneath the market, with investors repeatedly finding buyers as prices approach this psychological level. Bank of America analysts have questioned 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.
The next major test for gold comes on Friday with the release of the employment report, which economists expect to show September payroll growth slowing to about 90,000 from 162,000. A stronger report could push yields back towards their highs and reopen the attack on $4,000.