Gold Slips Under Rising Yields as Investors Keep Buying

Gold closed out September under heavy pressure from rising interest rates, a stronger dollar and oil prices back above $100 a barrel. Beneath the price weakness, though, investor demand held up, and analysts point to a structural feature of the gold market that could amplify any renewed buying.

The sharpest move came on Monday, September 28. New York gold futures fell 3.1% to $4,189 a troy ounce in afternoon European trading, their lowest level in more than seven weeks. Silver futures dropped 4.7% to $61.78 an ounce and platinum lost 2.6% to $1,731. Gold had spent most of the month in a relatively narrow band of roughly $4,300 to $4,500, well below the record of nearly $5,600 reached in January.

The selloff was both geopolitical and monetary. President Trump rejected Iran's truce proposal, pushing oil higher as the conflict approaches its eighth month. Higher energy costs feed inflation concerns, and those concerns reinforce expectations that the Federal Reserve will keep tightening. Fed officials voted unanimously earlier in September to raise their benchmark rate by a quarter point, the first hike since 2023. At the start of the week, traders priced roughly a 70% chance of another increase in October, according to CME Group's FedWatch tool.

Rising Treasury yields and a firmer dollar added to the pressure. Gold pays no interest, and a stronger dollar makes it more expensive for overseas buyers.

The result was gold's worst month since June, with prices down 6% in September.

Midweek data offered some relief. The core personal consumption expenditures price index, the Fed's preferred measure of underlying inflation, rose 0.2% in August, slightly less than expected. Traders cut the probability of an October hike to 37%, down from about 70% earlier in the week. Gold struggled to take advantage. Spot prices hovered between $4,160 and $4,170 an ounce on October 1 as the 10-year Treasury yield climbed to its highest level since 2002 and oil returned to triple digits.

OCBC Group Research called the price action "not so convincing." Its analysts argued that softer inflation alone may not be enough while yields and oil remain unfavorable. In their view, the key near-term question is whether Treasury yields can find a peak.

Demand has not disappeared. Holdings in gold-backed exchange-traded funds rose by more than 60 tons in September, even as prices fell. Analysts at Motilal Oswal Financial Services noted that the stalled U.S.-Iran ceasefire talks continue to support safe-haven demand, while higher oil remains an inflation risk.

That steady buying matters more than its size suggests. Bloomberg reported in late August that gold's above-ground stock is estimated at more than $30 trillion, but this hides a market that is thinner for new investment than its headline numbers imply. Much of the more than $300 billion traded daily reflects activity by banks, market makers and algorithmic funds rather than fresh capital competing for physical metal. A Goldman Sachs analysis found that gold ETFs accounted for just 0.17% of private U.S. financial portfolios last December. The bank estimated that every one-basis-point increase in that share could lift prices by about 1.4%. JPMorgan separately estimated that moving just 0.5% of foreign investors' U.S. asset holdings into gold could lift prices by roughly 18% a year under the market conditions at the time.

In the near term, gold will likely take its cues from Friday's U.S. jobs report, the direction of Treasury yields and developments in the Iran conflict. A strong labor market or further gains in oil could keep the Fed leaning hawkish and keep gold under pressure. A peak in yields or real progress toward a ceasefire could ease it.

Gold is under pressure in the short term but remains supported over the long term. Rates and the dollar are dominating the near-term trade. At the same time, continued ETF inflows and gold's small share of Western portfolios mean that even a modest shift in allocation could have an outsized effect on price.

Sources:

Petroni, Giulia. "Gold Falls to Seven-Week Low as Rate-Hike Bets Rise." The Wall Street Journal, 28 September 2026, https://www.wsj.com/finance/commodities-futures/gold-falls-to-seven-week-low-as-rate-hike-bets-rise-45658349?mod=Searchresults&pos=4&page=1

Kao, Kimberley. "Gold Edges Higher; Prices Could Remain Under Pressure Near Term." The Wall Street Journal, 30 September 2026, https://www.wsj.com/finance/commodities-futures/gold-edges-higher-prices-could-remain-under-pressure-near-term-57294882?mod=Searchresults&pos=1&page=1

Ryan, Jack, and Preeti Soni. "Gold Wavers as Traders Weigh Higher Bond Yields, Oil at $100." Bloomberg, 30 September 2026. Updated 1 October 2026, https://www.bloomberg.com/news/articles/2026-10-01/gold-steady-as-softer-inflation-data-tempers-fed-rate-hike-bets

Ryan, Jack. "Gold's Niche Status Means Big Upside If Investors Pile In." Bloomberg, 27 August 2026, https://www.bloomberg.com/news/newsletters/2026-08-27/gold-s-niche-status-means-big-upside-if-investors-pile-in