Gold prices rebounded on Thursday as the US dollar pulled back from an 18-month high, helping bullion recover from its weakest level since early August.
Spot gold rose about 0.7% to $4,141.09 an ounce, while December futures gained to around $4,165.
The bounce offers relief after a sharp slide driven by rising Treasury yields and a stronger dollar, but it does not yet signal that the correction is over.
Traders are focused on $4,275, a level Pepperstone sees as the threshold for a more constructive near-term view.
With the Federal Reserve still leaning towards another increase this year, the metal needs more than a softer dollar to rebuild momentum.
US dollar retreat gives gold some breathing room
The dollar index eased from Wednesday’s 18-month peak near 102.5, removing one of gold’s most immediate headwinds.
A weaker US currency makes dollar-priced bullion cheaper for overseas buyers and can quickly improve short-term demand.
ANZ Research analysts said that rising bond yields and a stronger dollar had been the main reasons for gold’s latest weakness.
They also argued that continued central-bank demand, particularly from China, should help limit the downside.
That support is becoming more visible. China’s central bank increased its gold holdings again in September, extending its buying streak to 23 consecutive months.
The World Gold Council also reported $10 billion of global gold ETF inflows in September, lifting holdings by 67 tonnes to a record 4,256 tonnes despite the monthly price decline.
Fed still blocks a clean breakout
The bigger problem for gold remains interest rates.
Minutes from the Fed’s September meeting showed that most officials still considered another rate increase likely before year-end, even though policymakers disagreed over whether September’s hike was mainly insurance against supply-driven inflation or a response to stronger demand.
Markets price only about an 18% chance of another increase in October but roughly an 80% probability by December.
The US 10-year Treasury yield remains around 5.3%, leaving the opportunity cost of holding non-yielding gold unusually high.
Phillip Nova analyst Priyanka Sachdeva told Barron’s that gold’s structural drivers remain intact, but said the metal is still vulnerable to swings in Treasury yields, oil prices and inflation expectations.
She identified the $4,000 area as an important longer-term level where conviction buying could return.
Why $4,275 matters for the next leg
The first real test for bulls is now $4,275. Pepperstone head of research Chris Weston said that gold remains a seller’s market until it clears that level.
The significance is straightforward: $4,275 would take bullion back above the zone where recent rallies have repeatedly failed and weaken the short-term pattern of lower highs.
A move from $4,141 to $4,275 requires only about a 3.2% gain, but the macro backdrop must cooperate.
A softer dollar and easing long-end yields could make that achievable. Another rise in oil, inflation expectations or Treasury yields would probably keep rallies contained.
The post Gold rebounds from a 2-month low as the dollar cracks: can $4,275 revive the rally? appeared first on Invezz