Wall Street in ambush for gold; A buying opportunity or the start of a big drop?

Source link: Wall Street on the hunt for gold; A buying opportunity or the start of a big drop? At a glance, gold is facing difficulty in the range of 4,150 to 4,200 dollars; A strong dollar, high yields on US Treasury bonds and expectations for further tightening of the Federal Reserve's monetary policies put pressure on the price of this precious metal. Central banks and gold-based exchange-traded funds (ETFs) continue to buy this […] source site: Safir Arjan

Gold is facing difficulty in the range of 4,150 to 4,200 dollars; A strong dollar, high yields on US Treasury bonds and expectations for further tightening of the Federal Reserve's monetary policies put pressure on the price of this precious metal.

Central banks and gold-based exchange-traded funds (ETFs) continue to buy the metal; So that the total reserves of global gold funds reached a record of 4256 tons in September.

UBS Bank raises the possibility of gold price return; Because with the reduction of concerns about interest rate hikes, the $4,000 support level and the upcoming inflation data can play a decisive role in the market's next path.

Gold has struggled to recover after retreating from September highs that pushed prices above $4,400 an ounce. The strengthening of the US dollar, the jump in the yield of treasury bonds and the expectations about the further contraction of the monetary policies of the Federal Reserve have put additional pressure on this precious metal.

However, as speculators are reducing their positions, central banks and gold-backed exchange-traded funds continue to buy the metal. This situation raises an important question: Is gold entering a long-term correction period, or does the recent price drop provide another buying opportunity for investors?

On Monday, gold prices traded in the range of $4,150 to $4,200 per ounce, and futures for December delivery fell to around $4,189. Investors were waiting for the release of new US inflation data. Gold has lost about 5% of its value since early September; The fall that occurred under the influence of the dollar index near the highest level of the last 18 months and the yield of 10-year US Treasury bonds at levels above 5%.

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This combination of factors is particularly challenging for gold; Because unlike bonds, gold does not generate interest or periodic returns. Rising interest rates make government bonds more attractive to investors, and a stronger dollar makes it more expensive for buyers outside the US to buy gold.

However, the factors that are now pushing bond yields higher may eventually become supportive for gold.

The Fed faces an increasingly difficult dilemma: on the one hand, economic growth is slowing, and on the other hand, inflation remains at high levels.

The US employment report for September showed that only 29,000 new jobs were created. At the same time, the preliminary index of consumer confidence fell to 46.3 in October. Meanwhile, the increase in energy costs in the wake of the Iran war has further complicated the inflation outlook.

The yield of 10-year US Treasury bonds, as one of the important indicators of the bond market, has recently exceeded 5.25%; A level that has not been seen since 2002. Some bond market analysts believe that if inflation and borrowing pressures continue, the yield of these bonds can approach 6%.

The short-term risk for gold is clear: If the US Consumer Price Index (CPI), due out on Wednesday, rises more than expected, the possibility of a rate hike in December will strengthen. Such an event could increase bond yields and the value of the dollar and put more pressure on gold prices.

However, the global wealth management division of UBS Bank believes that a significant part of the contractionary revision of market expectations about the Federal Reserve's monetary policies may have already been reflected in gold prices.

According to the bank's analysis on October 12, the weakening of the labor market and the stabilization of oil prices could eventually reduce expectations for further tightening of monetary policies and pave the way for an improvement in gold prices.

Continuation of buying gold by central banks

The most important argument in favor of increasing the price of gold should be found in the factors that are behind the recent fluctuations of the market.

Physical gold-backed exchange-traded funds attracted about $10 billion in September, according to data from the World Gold Council. As a result, the total capital inflow into these funds in the third quarter reached a record of 31 billion dollars.

The remarkable thing is that investors continued to buy even in the conditions of falling gold prices. The gold reserves of these funds increased by 67 tons in September and reached a record of 4256 tons.

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Central banks are another important source of demand for this precious metal.

According to the report of the World Gold Council, central banks bought about 289 tons of gold in the second quarter of 2026; A figure that shows a 62% increase compared to the same period last year.

This continuous buying process reflects a broader effort by monetary authorities to diversify foreign exchange reserves and reduce dependence on traditional currencies used in international reserves.

Can gold reach $4400 again?

UBS Global Wealth Management believes that a major part of the recent revision in market expectations for a Federal Reserve rate hike may be reflected in gold prices. Although the bank warns that it is still not possible to talk about the definitive stabilization of the price and the formation of a stable floor in the market, the decrease in employment growth and the stabilization of oil prices can eventually reduce the pressure on the yield of treasury bonds and create an opportunity for the gold price to recover.

However, the technical picture of the market remains fragile. Analysts consider the $4,000 to $4,030 range as a vital support zone. On the contrary, price stabilization above the range of $4,280 to $4,320 can strengthen the possibility of the start of a new bullish wave.

Chinese market analysts expect gold to trade mainly in the range of $4,000 to $4,400 in the fourth quarter. According to them, the Federal Reserve's policy meeting in December can play a decisive role in determining the direction of the market's next move.

Beyond the short-term outlook for interest rates, the long-term argument for investing in gold rests increasingly on concerns about the fiscal stability of the US government, diversification of central banks into reserves and geopolitical instability.

The World Gold Council has also emphasized that increasing government borrowing costs and intensifying financial uncertainties can lead investors to alternatives to government bonds; Even as rising bond yields, as usual, make gold less attractive.

As a result, gold is caught between two opposing forces: on the one hand, the Federal Reserve is determined to contain inflation, and on the other hand, investors are increasingly concerned about the consequences of continued high interest rates for government finances and economic growth.

US inflation data; The next driver of gold prices

The next most important driver of the market will be the US inflation report on Wednesday (October 22).

If the inflation rate is announced higher than expected, the yield of treasury bonds and the value of the dollar may rise, pushing the price of gold towards the level of $4000 once again.

On the other hand, if the inflation data is weaker than the forecasts, the possibility of another interest rate hike by the Federal Reserve decreases. Such a scenario could provide the first serious opportunity for gold buyers to once again take the initiative in the market.