Russia Boosts Gold Purchases as Market Balances Dollar and Demand

Gold prices have stabilized above $4,100 per ounce, supported by softer expectations of a Federal Reserve rate hike, despite a stronger US dollar and rising Treasury yields. Spot gold rose 0.7% to $4,168.89, while December futures climbed 1% to $4,196.90. The market is closely monitoring Russia's plans to increase its foreign exchange and gold purchases fivefold from October 7 through November 6, allocating 279.42 billion rubles, or roughly $3.3 billion, up from around $650 million previously.

The daily purchase rate will increase from about 2.1 billion rubles to 12.7 billion rubles, equivalent to $148 million. These purchases are part of Russia’s budgetary rules, redirecting additional oil and gas revenue into the National Welfare Fund. However, not all of the 279.42 billion rubles will go directly toward gold, as the allocation covers both foreign exchange and gold acquisitions.

Despite this potential boost in demand, gold faces pressure from a stronger US dollar, which makes dollar-denominated gold more expensive for international buyers. Additionally, US 10-year and 30-year Treasury yields reached fresh 24-year highs, increasing the appeal of interest-bearing assets over gold, which does not pay a yield. Ole Hansen, head of commodity strategy at Saxo Bank, noted that support for gold is just above $4,100, a key level for traders to watch.

The market is balancing strong official-sector demand with a firm dollar and elevated Treasury yields, leaving the $4,100 area as a critical reference point for the next move in gold prices.