Spot gold rose about 0.7% to $4,168.89, while December U.S. futures gained roughly 1% to $4,196.90. The advance came even as long-term borrowing costs remained near multi-decade highs, highlighting how strongly investors are responding to shifting Federal Reserve expectations and persistent demand for bullion.
The move follows a difficult September, when gold fell 6.6% despite heavy ETF inflows.
Fed Hike Odds Are Falling Fast
The immediate catalyst is monetary policy.
Weaker September employment data and downward revisions to earlier payroll figures have sharply reduced expectations for another Fed hike this month. Markets now assign only about a 21% probability of an October increase, down from roughly 70% before the jobs data.
That matters because gold pays no interest. Rising rates normally increase the opportunity cost of holding bullion, which is why recent Treasury yields above 5% have repeatedly limited gold’s upside.
The pressure has not disappeared. The dollar remains strong and long-term yields are still elevated, meaning another inflation surprise could quickly revive selling.
Record ETF Holdings Are Providing Support
The other side of the equation is unusually strong investor demand.
Global physically backed gold ETFs recently reached a record 4,189 tonnes, after August brought about $18 billion of inflows. China’s central bank also added 20.2 tonnes that month, extending its buying streak to 22 consecutive months.
That combination of ETF demand and central-bank purchases is helping gold absorb the pressure from high rates.
The underlying shift may be structural. Gold now represents about 27% of global official reserves, overtaking U.S. Treasuries as central banks diversify away from dollar-denominated assets. The reserve shift has made bullion less dependent on the traditional inverse relationship with bond yields.
$4,000 Remains the Key Floor
Morgan Stanley recently identified $4,000 as an important support level, citing strong physical buying, the possibility of eventually lower bond yields and easing energy prices. The bank’s gold outlook suggests buyers could return aggressively if prices approach that level.
| Bullish Forces | Bearish Forces |
|---|---|
| Lower October Fed-hike odds | 5%+ Treasury yields |
| Record ETF holdings | Strong U.S. dollar |
| Central-bank buying | Inflation risk |
| Reserve diversification | Possible December hike |
