September 24, 2026
The price of gold has slipped below the $4,300 mark and was last trading at around $4,257 per ounce. A stronger U.S. dollar and persistently high bond yields are weighing on the precious metal following the Federal Reserve’s latest interest rate hike. Nevertheless, BMO Capital Markets does not see this as a simple period of weakness in the market, but rather as a sign of remarkable resilience:
Stability Despite Rising Yields
Since the Federal Reserve’s meeting, both the U.S. dollar and yields on 10-year U.S. Treasury bonds have risen significantly. This is typically a challenging environment for gold, as higher yields make non-interest-bearing investments appear less attractive. In addition, BMO Economics expects another 25-basis-point rate hike before the end of the year.
Nevertheless, BMO points out that, following the decline in the run-up to the rate hike, gold traded relatively steadily between $4,300 and $4,400. The bank views this stability in particular as an indication that the traditional relationship between gold and bond yields is continuing to weaken.
According to analysts, speculative demand and purchases by official entities are increasingly acting as a counterweight to rising financing costs. Gold is thus being valued less exclusively based on real interest rates and bond yields, and more on hedging motives, currency risks, and concerns about the sustainability of U.S. public finances.
Physical Demand and ETF Inflows Support the Market
In addition to the macroeconomic landscape, BMO also sees new support in the physical market and in investment demand.
- ETF inflows: Global gold-backed ETFs recorded inflows of $4.2 billion last week (North America: $2.2 billion, Europe: $1.1 billion, China: $637 million).
- India: In the world’s second-largest gold-consuming country, demand remains robust ahead of the festival and wedding season despite historically high prices. A narrowed price discount relative to London signals rising physical demand.
- China: Net imports of non-monetary gold rose 48 percent year-over-year in August to 124.5 metric tons. Investment demand is also picking up: Chinese gold ETFs increased their holdings by about 44 metric tons through August.
Despite robust demand, BMO remains cautious in the short term as monetary policy becomes more restrictive. In June, the bank had lowered its forecast and expected an average gold price of $4,625 per ounce for the second half of 2026. At the same time, BMO continues to expect gold to rise back above $5,000 in the first quarter of 2027.
