I. Gold Retreats to Lowest Levels Since August



Spot gold declined 1.3% on October 7 to settle at $4,109.78 per ounce, having touched an intraday low of $4,066.30, its lowest level since August 5.

London gold has since rebounded to $4,124.64, advancing $13.93 or 0.34% intraday.

The session opened at $4,104.30, printing an intraday high of $4,135.14 against a low of $4,103.32.

Market participants remain focused on dollar strength, elevated Treasury yields, and expectations of an additional Fed rate hike within the year.

II. Most Fed Participants View Another Rate Hike Appropriate Before Year-End



Minutes from the September FOMC meeting revealed policymakers unanimously agreed to raise rates by 25 basis points at the September 15-16 meeting, but differed on the underlying rationale.

Some participants underscored the necessity of preventing energy and other commodity shocks from generating broader inflationary contagion, while hawkish officials focused on emerging demand-driven inflation.

A majority of participants indicated that raising the target range for the federal funds rate again before the end of the year could be appropriate.

Select officials even contended that the current policy rate is not yet restrictive, or exhibits only modest restrictive restraint.



Markets currently expect the Fed to hold the benchmark rate steady within the 3.75%-4.00% target range at the October 27-28 meeting.

CME FedWatch data reflects an 18.3% probability of at least a 25-basis-point hike later this month, down from approximately 38% previously, whereas the probability of a hike at the December 8-9 meeting stands near 80%.

Kansas City Fed President Schmid noted that curbing inflation may require further tightening, while San Francisco Fed President Daly stated the policy path depends on whether price pressures persist.

New York Fed President Williams and Fed Vice Chair Jefferson previously favored patience regarding additional rate adjustments.

Peter Grant, Vice President and Senior Metals Strategist at Zaner Metals, remarked that markets continue to signal interest rates will remain higher for longer.

III. Treasury Yields Hit 24-Year Highs as Dollar Approaches 18-Month Peak



On October 7, the Dollar Index rose roughly 0.4% to close at 102.25, peaking intraday at 102.50 near its 18-month high of 102.53.

Concurrently, the euro slipped 0.53% to $1.1198, approaching a 17-month trough.

The US 10-year Treasury yield surged intraday to 5.364%, marking a 24-year high, while the 30-year yield touched 5.669%, also a 24-year peak.

A subsequent $39 billion 10-year note auction met solid demand, clearing at 5.300% with a bid-to-cover ratio of 2.77 (above the prior six-auction average of 2.54), prompting yields to pull back from highs.

The 2-year and 10-year Treasury yield spread widened from 48.1 to 52.2 basis points, touching an intraday peak of 53.7 basis points, the widest since mid-August.

In Europe, French 10-year bond yields climbed 11.9 basis points to 4.8696%, recording their largest single-day surge in two weeks, while German 10-year yields held steady at 3.4805% amid ongoing scrutiny of French fiscal sustainability.

IV. PBOC Extends Gold Buying to 23 Months as Markets Track Policy Meetings and Regional Conflicts



Data from the People's Bank of China showed gold reserves stood at 77.47 million ounces at the end of September, up 740,000 ounces month-on-month, marking 23 consecutive months of accumulation.

Grant noted that official sector demand remains a fundamental anchor for bullion, forecasting prices may retest lows near $4,000 before rallying toward $4,400 by year-end.

Geopolitically, Houthi forces escalated strikes against Saudi aviation infrastructure, targeting Riyadh's King Khalid International Airport and Abha Airport, causing 3 deaths and 36 injuries.

Houthis additionally warned international carriers utilizing Saudi airspace to halt flights, sustaining market vigilance over maritime risks in the Bab-el-Mandeb Strait.

The International Energy Agency agreed to expedite strategic reserve releases, expecting to inject roughly 100 million barrels of energy products into markets, alongside France's release of 10 million barrels of fuel.

EIA data indicated US commercial crude inventories fell by 3.2 million barrels to 424.1 million barrels in the week ending October 2, contrasting with analyst forecasts of a 1.7-million-barrel build.

Investors will now monitor the Fed's October and December FOMC meetings, upcoming labor and inflation data, alongside strategic reserve developments and debt auctions.

The trajectory of interest rates, regional security shifts, and central bank bullion accumulation will remain the pivotal drivers governing precious metals markets.