I. Gold Market Performance and Fundamentals

In the early morning of September 28 (Beijing Time), London spot gold declined, touching a low near $4214 per troy ounce. The front-month COMEX gold futures fell in tandem. The primary driver behind this gold price correction is rising real interest rates. The 10-year US Treasury yield remains elevated, and the market has repriced expectations for Federal Reserve rate hikes. According to the CME FedWatch Tool, the probability of a 25-basis-point rate hike at the October FOMC meeting has climbed to 64.8%, and the market has begun pricing in the possibility of an additional rate hike in December. Gold is a non-interest-bearing asset; higher interest rates directly raise holding costs and weigh on gold prices in the short term.
 

Nevertheless, gold has demonstrated resilience amid negative news, underpinned by gold reserve accumulation by global central banks. Data from the World Gold Council (WGC) shows that net gold purchases by global central banks reached 288.9 tonnes in Q2 2026, up 62% year-on-year, hitting an all-time high for the quarter. The People’s Bank of China has increased its gold reserves for 22 consecutive months. A report from the European Central Bank (ECB) states that gold accounted for 27% of global sovereign reserve assets at the end of 2025, surpassing US Treasuries to become the top reserve asset for central banks worldwide. Many central banks have ramped up efforts to repatriate gold holdings and reduce reliance on dollar-denominated assets. This structural buying support has prevented a sharp crash in gold prices even amid surging Treasury yields, and the traditional inverse correlation between gold and US Treasury yields has temporarily weakened.
 

Short-term geopolitical factors serve as a variable. Iran’s Foreign Minister stated that the country is fully prepared for an escalation in US-Iran conflict while retaining room for diplomatic negotiations. International crude oil prices spurred following this statement. Higher oil prices stoke expectations of inflation rebound, exerting dual-sided impacts. On one hand, rising inflation forces the Fed to maintain high interest rates and pressures gold. On the other hand, safe-haven demand triggered by conflict escalation temporarily boosts gold buying, intensifying bull-bear battles in the market.
 

II. Foreign Exchange Market (US Dollar & Major Non-Dollar Currencies)

The US Dollar Index is supported by hawkish Fed expectations and holds above the 101 level. Sticky US inflation is the fundamental driver of dollar strength. The market is heading into a major data week: US August PCE Price Index will be released on September 30, and September non-farm payrolls and unemployment rate will be published on October 2. If PCE and non-farm data exceed forecasts, rate-hike expectations will strengthen further, lifting the US dollar. The euro, British pound, Japanese yen and other non-dollar currencies will remain under pressure. Conversely, cooling inflation and employment data will trigger a dollar correction and may fuel a gold rebound.
 

• Euro: The Eurozone economy remains sluggish, with manufacturing PMI staying in contraction territory. Expectations for ECB rate cuts have risen. Monetary policy divergence between the US and Eurozone weighs on EUR/USD, which continues to range-trade at low levels.
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• Japanese Yen: Domestic inflation in Japan has moderated somewhat, cooling Bank of Japan rate-hike expectations. The US-Japan interest rate differential remains wide, keeping USD/JPY firm.
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• Markets are watching closely for potential forex intervention by the Bank of Japan.
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• British Pound: UK inflation stickiness is higher than that in the Eurozone, leaving the Bank of
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• England with a cautious policy stance. Sterling moves largely with dollar strength or weakness.
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• Coupled with weak domestic UK economic growth, its upside rebound potential is limited.

III. Institutional Views

1. Ole Hansen, Head of Commodity Strategy at Saxo Bank: The pricing logic for gold is shifting. In the short run, real US Treasury yields and Fed policy are key; in the medium-to-long term, central bank gold purchases are decisive. Sustained buying by central banks acts as the biggest buffer for gold prices. Short-term volatility will not overturn the medium and long-term structural support. However, gold is unlikely to form a trending rally until inflation data is released.
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3. Tony Kim, Head of Metals, FICC at Goldman Sachs: The recent pullback in gold prices is merely a temporary correction within a bull market, not a trend reversal. As long as central banks keep buying gold, there remains scope to test previous all-time highs after the adjustment.
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5. Société Générale: Investors need to guard against further upside risks to the 10-year US Treasury yield. If it breaks above 5.5%, global asset prices will face revaluation. Risk assets will come under pressure, and gold will also be exposed to short-term downside risks.
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IV. Key Events to Watch This Week (Impact on Gold & Forex)

1. US August PCE Price Index (the Fed’s preferred inflation gauge)
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3. US September Non-Farm Payrolls and Unemployment Rate
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5. Speeches by senior Fed officials; monitor shifts in policy stance
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7. Real-time developments in the Middle East and crude oil price volatility
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9. Global gold ETF capital inflows and outflows