Precious Metals Review

“Gold may retest support around $4,000 an ounce in the near term, UBS says, where the bank expects structural dip buyers to establish a floor, as rising real yields and a stronger dollar increase the opportunity cost of holding the yellow metal, a non-yielding asset.

“Near-term headwinds persist: High U.S. real yields and a firm dollar could push gold back toward $4,000/oz,” UBS strategist Giovanni Staunovo said in a note. Spot gold traded at $4,191 on Friday at the time of writing.

The decline in prices appears driven by non-commercial accounts that have reduced net long positions in futures and options, Staunovo said. ETF holdings, however, have stayed “unusually resilient,” with steady inflows in recent weeks.

Gold has also proved notably resilient to the sharp rise in yields, the strategist argues, suggesting its sensitivity to real rates has weakened as structural demand offers a stronger offset than in earlier cycles. He cited central bank diversification, concerns about public debt and debt-servicing costs, an expected weaker dollar over time and robust Chinese buying. India demand should benefit from the festival season and lower prices.

Central bank purchases kept a solid pace in September, based on preliminary data, led by China at 23 metric tons and Uzbekistan at 7 tons. UBS continues to expect annual central bank purchases of 750 to 1,000 tons.

The market is pricing in a little more than 75 basis points of Fed hikes through 2027. UBS expects one more hike this year and two 25 basis point cuts in 2027. As markets reassess the scope for further tightening, lower real yields should lead to higher gold prices, Staunovo said.

Looking ahead, UBS forecasts gold at $4,600 by December, $5,000 by March 2027, $5,200 by June and $5,400 by September 2027. Staunovo said pullbacks toward $4,000 “offer opportunities to add exposure,” and recommends a mid-single-digit gold allocation for investors who like real assets.”

“Gold rose to a ‌one-week high on Friday, as falling oil prices eased concerns around inflation and pressure on US Treasuries, while traders assessed the likelihood of further US Federal Reserve interest rate hikes.

Spot gold rose 1.3% to $4,186.04 ​by 09:39 a.m. EDT (1339 GMT), heading for a weekly gain of about 1%. ​The metal fell to a two-month low on Wednesday as a stronger ⁠dollar and rising US Treasury yields weighed on the non-yielding metal.

US gold futures for December ​delivery also added 1.3%, trading at $4,211.20 per ounce.

“Bullion is finding some breathing room today as ​oil benchmarks and longer-term Treasury yields ease away from recent highs,” said Han Tan, chief market analyst at Bybit.

Oil prices fell as worries over Middle East supply disruptions subsided after US President Donald Trump said ​the country would not attack Iran before the US midterm elections next month.

US 10-year Treasury ​yields were off over two-decade highs hit on Wednesday.

St. Louis Fed President Alberto Musalem said on Thursday ‌the ⁠US central bank will need to hike rates again to bring inflation back to its 2% target.

Traders are pricing in a 19% chance of a rate hike in October and an 84% probability of at least one 25-basis-point increase by December, according to the CME’s FedWatch tool.

Gold ​tends to lose its ​appeal compared to ⁠yield-bearing assets in a high interest-rate environment.

“It is arguable that a further Fed hike is already priced in but so is the expectation ​for continued official sector net purchases,” said Rhona O’Connell, head of ​market analysis ⁠at Stone X.

“Without any Black Swan event I find it hard to see gold breaking convincingly higher.”

Meanwhile, gold demand in India was sluggish this week as prices rebounded, while trading in top consumer ⁠China ​was subdued during the holiday-truncated trading period.

Among other metals, ​spot silver gained 2.4% to $60.80 per ounce.

Platinum jumped 3.6% to $1,692.85 and palladium climbed 2.5% to $1,151.08, but both metals were ​headed for a weekly loss.”