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U.S. Treasury’s gold revaluation could restart the ‘debasement trade’ as yield pressures fade​

(Kitco News) – Gold has likely seen the worst of its Treasury-yield-driven losses, and once the Iran situation improves and Fed rate hike expectations ease, the Treasury department itself could provide a new tailwind for bullion prices between now and year-end, according to Peter Kinsella, Head of Investment Services for the UK at Swiss private bank UBP.Kinsella noted that gold has traded lower since the Federal Reserve’s 25-basis-point rate hike in September.“The downward move has been rather muted, considering the huge rise in both nominal and real inflation-adjusted interest rates,” he said. “US 10-year yields have risen to highs of 5.30%, and 10-year TIPS yields (a proxy for real interest rate expectations) have risen to levels of just below 3%.”“Normally, we would expect gold to decline materially in such circumstances,” he wrote. “The modest decline suggests that gold–interest rate correlations have continued to wane.”Kinsella pointed out that throughout August and early September, investors continued to increase their exposure to gold, even as treasury yields continued to rise. “Retail investors upped their ETF positions and institutional investors increased net longs in the futures markets,” he said. “These flows are normally highly interest rate sensitive; however, there has been little to no discernible reaction to the large rise in long-end interest rates so far.”“We believe that most of the move in interest rates is now largely complete, giving only limited downside risks for gold and the wider precious metals complex from current levels.”Meanwhile, central banks continue to buy gold, with China’s central bank one of the largest purchasers of bullion once again in 2026. “The pool of central banks adding to their gold holdings this year has narrowed, though this likely reflects elevated prices rather than an unwillingness to increase gold holdings,” Kinsella said. “The World Gold Council’s latest survey showed that a record 45% of central banks expected to raise their gold holdings over the coming year. This means that gold is likely to be well supported by central bank purchases on any significant dip in pricing.”In the short term, UBP expects gold to trade within a tight range. “Markets have moved to price in at least three further 25-bp rate hikes in the coming months, but these expectations appear to be on the high side,” he said. “Most of the rise in US core inflation dynamics reflects one-off factors, giving the US Federal Reserve room to ease up on potential rate hikes once the situation in the Middle East is resolved.”And with rate hikes off the table, bullion prices could actually get a boost from the Treasury in the coming months. “The most pressing upside risk for gold in the coming months would be a potential revaluation of the US Treasury’s gold holdings, which are estimated at just over 8,000 tons,” Kinsella warned. “A revaluation towards current market prices would implicitly devalue the USD relative to gold, thus sending a strong signal to the market and potentially restarting the ‘debasement trade’ which played out in 2025.”Gold prices declined sharply following the release of this morning’s hotter-than-expected CPI report, and they continue to trade near fresh session lows at the time of writingSpot gold last traded at $4,079.42 per ounce for a loss of 1.96% on the daily chart.See live precious metals prices for gold, silver, platinum and palladium — in USD, CAD and 12 more currencies.

Can gold hold $4,000 with an October rate hike still in play?​

(Kitco News) – Hotter-than-expected consumer prices have put an October rate hike back in play, pushing real bond yields higher and dragging gold prices below a critical near-term support level.However, commodity analysts expect support to continue to hold at $4,000 an ounce, as the Federal Reserve is unlikely to raise interest rates just one week before American voters head to the polls for the 2026 midterm elections.In a note Wednesday, Ryan McKay, Director of Commodity Strategy at TD Securities, noted that gold’s inability to break through resistance at $4,200 has prompted speculative fund managers to liquidate their long positions, while the disappointing inflation numbers have added fuel to the fire.“This systematic selling remains the one corner of the precious metals market that continues to be a notable drag on the yellow metal,” he said.However, he added that other pillars of the gold market remain strong and should continue to provide critical support at $4,000 an ounce, which has become an important technical pivot level.“Beyond near-term hike pricing and systematic selling, macro discretionary positions remain elevated, while ETF inflows and central bank demand also remain strong. These flows have ultimately offered strong support for gold, and we expect these flows will remain robust, especially in the $4,000-4,100/oz region,” he said.Economists and analysts note that the key question for markets is whether inflation is bad enough to force the Federal Reserve to raise interest rates later this month. Traditionally, in an attempt to avoid the appearance of political bias, the Federal Reserve has refrained from changing interest rates immediately before elections.However, with the headline Consumer Price Index rising 3.6% over the 12 months through September, markets are once again shifting their expectations. According to the CME FedWatch Tool, markets see a nearly 44% chance of a rate hike this month. Ahead of the CPI report, markets were pricing in only a 21% chance of a hawkish move.Fixed-income analysts at TD Securities do not expect the Federal Reserve to raise interest rates later this month; however, that does not mean gold will see a sharp recovery anytime soon.The Canadian bank expects interest rates to remain higher for longer because of persistent inflationary pressures.“While we don’t expect an October hike despite a sharp increase in pricing, the stronger data hints at the risk of more hikes in the coming months, maintaining upward pressure on rates,” the analysts said.Economists note that a rise in core inflation is complicating the economic outlook. They explained that it is not just higher energy prices temporarily driving consumer prices higher. Inflationary pressures are becoming embedded in the broader economy.“Inflation pressures are broadening beyond energy, suggesting the last mile back to target could remain bumpy and keep interest rates elevated. The latest report complicates the Fed’s decision this month, as the road back to price stability is looking increasingly difficult to navigate,” said Jeffrey Roach, Chief Economist at LPL Financial, in a note Wednesday.Alex Kuptsikevich, Chief Market Analyst at FxPro, said he expects gold prices to remain stuck between support at $4,050 and resistance at $4,200 an ounce.“High oil prices, Treasury bond yields and a strong dollar are putting pressure on the precious metal. At the same time, strong investment demand and central bank purchases of bullion are preventing it from collapsing,” he said.However, he added that investors need to pay attention to comments from Federal Reserve Chair Kevin Warsh during Thursday’s overnight session, when he is scheduled to participate in a fireside chat as part of the annual meetings of the International Monetary Fund and World Bank Group in Bangkok.“Against the backdrop of accelerating CPI, hawkish rhetoric from the Fed Chair could push prices below $4,000,” said Kuptsikevich.In a social media post, Ole Hansen, Head of Commodity Strategy at Saxo Bank, said he does not expect the U.S. central bank to raise interest rates in October; however, he added that the committee has a narrow path to navigate.“With inflation showing renewed signs of persistence, the Fed may increasingly find itself caught between defending its inflation-fighting credibility and avoiding accusations of political interference. For gold, the immediate challenge remains the combination of rising real yields, a stronger dollar and the prospect of tighter monetary policy, even as longer-term investment demand continues to provide underlying support,” he said.See live precious metals prices for gold, silver, platinum and palladium — in USD, CAD and 12 more currencies.

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