Rising Rates and Dollar Strength Pose Headwinds to Gold

Economist Amy Gower warns that gold faces significant near-term pressures from rising long-dated bond yields and a stronger dollar. As a non-yielding asset, the yellow metal becomes less attractive when investors can earn higher returns elsewhere, particularly with interest rates on the rise. However, Gower argues that gold is still well supported by forces counterbalancing those headwinds. These include robust physical demand for the metal, including central bank purchases, active buying from China and Poland, Chinese gold imports running more than 10 times the additions to the People's Bank of China (PBOC) reserves, and increased holdings in gold exchange-traded funds through September. Gower also highlights longer-term supports such as concerns about currency debasement, government debt, and fiscal sustainability.