Gold falls below $4,200 ahead of key U.S. inflation report

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Gold falls below $4,200

Highlights

Spot gold falls to $4,185 per ounce.
China extends gold buying to 23 months.
U.S. inflation data may influence Fed policy.

The latest market figures showed spot gold at $4,185.66 per ounce, down 0.21%, while December gold futures fell 0.13%, to $4,210.65. Earlier, a decline in oil prices and long-term Treasury yields briefly supported precious metal prices, Bloomberg reports.

Lower energy costs reshape interest rate expectations

Oil prices initially retreated after President Donald Trump claimed that Russia and Ukraine had agreed to an energy ceasefire, although he provided no details. The possibility of fewer disruptions to energy infrastructure offered some relief from inflation concerns that have complicated monetary policy decisions.

Gold typically benefits when investors expect lower interest rates because the metal pays no interest. However, persistent inflation linked to the U.S.-Iran war has kept borrowing costs elevated and reduced its appeal relative to yield-bearing assets.

U.S. 30-year Treasury yields declined on Friday, providing temporary support before Monday's retreat. Investors are now awaiting Wednesday's inflation report and remarks from Federal Reserve Chair Kevin Warsh at the International Monetary Fund's annual meeting in Bangkok on Thursday. Fed Governor Christopher Waller and Cleveland Fed President Beth Hammack are also scheduled to speak.

China increases gold purchases as prices retreat

China has emerged as an important source of demand during gold's correction. The People's Bank of China purchased approximately 23 metric tons in September, its largest monthly addition in nearly three years, extending its buying streak to 23 consecutive months.

Chinese gold imports exceeded 1,000 tons during the first eight months of 2026, worth a record $158.8 billion. That surpassed the 886 tons imported throughout 2025, reflecting stronger demand from households, businesses, and financial institutions.

Beijing has also reduced its exposure to U.S. government debt. Its Treasury holdings fell to $618 billion in July, an 18-year low, as authorities continued diversifying foreign-exchange reserves.

Domestic economic conditions have reinforced demand. China's prolonged property downturn, weak equity performance, and low deposit yields have encouraged investors to seek alternatives, including physical gold.

Central bank buying provides support amid monetary uncertainty

Gold has lost roughly one-fifth of its value since the U.S.-Iran war began in February, after reaching a record above $5,500 in January. Higher bond yields and expectations of further monetary tightening have outweighed some of the traditional safe-haven demand generated by geopolitical tensions.

Nevertheless, China's reserve accumulation and purchases by gold-backed exchange-traded funds have helped cushion the decline. Central banks generally operate with longer investment horizons than private investors, making their demand less sensitive to short-term price movements.

The next inflation reading will be important for determining whether the Federal Reserve can avoid additional tightening. For gold, the balance between persistent official-sector buying and the opportunity cost of holding a non-yielding asset remains the central market question.

Earlier, we reported that central banks keep gold as a reserve hedge amid higher bond yields.

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