Gold snapped back on Thursday, with the spot price closing 0.9% higher at USD 4,138.74 an ounce as a retreating dollar handed the metal its first meaningful relief in days. The bounce came despite a hotter-than-expected US inflation reading that did little to quiet talk of another Federal Reserve rate hike.
The recovery follows a bruising session in which bullion slid to its weakest level since October 7, according to Reuters. Thursday’s dollar pullback — coming one day after the US currency touched an 18-month high — provided the immediate catalyst for fresh buying. What it does not represent is any genuine easing of the monetary policy pressures weighing on gold.
A Currency Story, Not an Inflation Story
The turn in the dollar explains the reversal far better than any shift in the inflation outlook. If anything, the latest price data have sharpened expectations for US monetary policy rather than softened them. Gold is rebounding alongside rate worries, not because they are fading.
US consumer prices rose 0.6% in September from the prior month, the sharpest monthly advance since April, reinforcing market bets on another Fed hike. Investors are therefore caught between two opposing forces: a weaker dollar offering near-term support, and an inflation picture that continues to argue for restrictive policy and caps the upside.
Daly Keeps October Off the Table
San Francisco Fed President Mary Daly said further increases in short-term rates are likely necessary, according to Reuters, while signaling no need to move at the October 27–28 meeting. Her remarks draw a line between the broader case for tightening and the timing of the next step.
Fresh clues are due with Thursday’s US producer price and retail sales releases, both of which sit alongside the CPI report in the rate debate. Those prints could reveal whether recent inflationary pressure is bleeding into other corners of the economy. As a result, the day’s advance offers no clear verdict on where prices head next — everything hinges on whether the dollar’s retreat sticks or new data push rate expectations higher again.
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Banks Split the Near Term From the Long Run
UBS strategist Giovanni Staunovo sees a near-term test of support at USD 4,000 an ounce, while the bank projects USD 4,600 by December 2026 — pairing short-term caution with a later recovery. That view rests in part on expected central bank purchases and inflows into gold ETFs, demand that offsets the drag from rates and the dollar but does not, in UBS’s assessment, rule out another pullback.
Bank of America expects an average price of USD 4,000 an ounce in the fourth quarter of 2026, and sees a possible dip to USD 3,750 if support gives way. The bank also cautions that further losses could trigger ETF selling. For a more durable rebound, it points to clearer Fed signals, easing inflation concerns and an end to policy tightening. Thursday’s dollar decline, in that light, satisfies only part of the checklist.
Record ETF Demand Has Yet to Neutralize the Pressure
The demand side tells a different story. The World Gold Council reported on October 9 that physically backed gold ETFs drew USD 10 billion in September, with holdings rising 67 tonnes to a record 4,256 tonnes. Those purchases show that price weakness is not the same thing as an exodus from gold-backed funds — capital can flow in even as quotes fall.
Central banks have been buyers too. Net reported gold purchases reached 39 tonnes in August, according to World Gold Council data published October 6, led by China and followed by Uzbekistan and Poland.
Even so, that demand provides a counterweight to policy uncertainty rather than eliminating it. The World Gold Council had already attributed September’s decline to rising US Treasury yields and a firmer dollar, meaning the tension between strong demand and price pressure predates Thursday’s session. The Fed’s next decision could shift rate expectations once more, and for gold the question is whether monetary pressure eases or persists. The hefty ETF inflows on their own have yet to be enough to cancel it out.
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