Gold ends up 554 pips as Friday rally wipes out Fed minutes slide

Gold closed the week at $4,195.02, up 554 pips from $4,139.62. The path was rough. A 568 pip fall on Wednesday followed Fed minutes that kept rate hike risk alive. Gold then won it all back on Thursday and Friday as the dollar and Treasury yields eased.

The high-impact news

ISM services survey (Mon 5 Oct, 15:00 UK). This survey asks service businesses how activity is going, and a reading above 50 means the sector is growing. It matters for gold because strong services activity and rising prices paid can keep US interest rates high, and gold pays no interest. September came in at 54.9 against a forecast of 54.7, so about in line. Gold still jumped 113 pips in the first hour, roughly double the usual first-hour move of about 58 pips. Four hours after the release it was only 10 pips higher. Details are in our ISM services survey breakdown.

Why the jump faded: the prices part of the survey kept yields high. By the evening gold was sitting near $4,138. Treasury yields reached their highest level since 2002 that day, and the dollar index hit an 18-month high on worries about French debt. That was too much for a modest early bounce to survive. Gold had started the week with some support, because last week's weak jobs data had cut the odds of an October Fed hike.

History does not point either way here. Since April 2021, gold rose in the first hour after 15 of 25 clear misses on this survey and after 8 of 19 clear beats. This week's result was neither, and the reaction was quickly absorbed by the move in yields.

What else moved gold

Rates. On Wednesday the minutes of the Fed's September meeting kept the risk of a December hike alive. Treasury yields set new 24-year highs that day, and the dollar index climbed back above 102. Gold fell 568 pips and reached its lowest level in nine weeks.

Oil and geopolitics. On Thursday, tensions around Hormuz and a 5% jump in oil revived inflation worries. Weekly jobless claims fell to 197k. Gold still recovered 317 pips as the dollar rally stalled. On Friday oil eased, talks with Iran were described as productive, and Treasury yields came down sharply. Gold added 569 pips and tested $4,200.

Sentiment. Friday's preliminary consumer sentiment reading fell to 46.3, while inflation expectations rose. Separately, the White House formed a committee to investigate Fed governor Cook.

Demand. World Gold Council figures showed central banks added 39 net tonnes in August, with China, Uzbekistan and Poland buying the most. China's central bank bought 21 tonnes in September, its largest monthly purchase in three years. Gold ETF holdings hit a record in September. Perth Mint sales jumped even as prices fell, and private investors bought into the dip. The UK posted a record quarter. Russian gold continued to reach China through Hong Kong in record volumes, and ICE launched gold futures trading in London.

What the coverage is focused on now

By the end of the week, the news was mostly about the Fed's path: whether a hike by the end of the year is still possible, and how yields near multi-decade highs fit with a softer dollar. Other themes were weak US consumer sentiment alongside rising inflation expectations, diplomacy with Iran and the swings in oil, and steady buying by central banks and private investors.

Get it live in the Newsroom

The Newsroom in the Trade By Focus app shows this as it happens: every gold article read as it comes in, which way it leans and what it is about, plotted against gold's price, alongside the calendar and gold's reaction to every release. Open the Newsroom

Important

For analysis purposes only. This describes last week's gold news and what gold did; it is not financial advice or a recommendation to trade. The news is no guide to where gold goes next. Trading carries a high risk of losing money.