International gold prices hover around $4,600/ounce in a tug-of-war

Short-term volatility increases

International gold price engages in a tug-of-war around $4,600/oz

By Reporter Ge Yao

After consecutive rallies, the international gold price has entered a tug-of-war near the $4,600/oz threshold. On August 26, the London spot gold price pulled back from its highs, briefly dropping below $4,600/oz during trading, with a decline of over 1%; on August 27, the gold price continued to oscillate repeatedly around this level.

Institutions believe that the mid- and long-term allocation logic for gold remains supported, but after the rapid price increase, volatility may intensify. Whether gold can open up further upside depends on the performance of the US dollar, real interest rates, investment demand, and the Federal Reserve's policy path.

Multiple factors drive gold price breakout

On August 27, the London spot gold price fluctuated near $4,600/oz, briefly dipping below this threshold. In the previous trading session, the gold price dropped as low as $4,582.74/oz, a notable pullback from this week’s high.

Since August, the London spot gold price has continuously rebounded from its recent lows, rising back above $4,600/oz last week. As this week began, gold prices remained strong, once surging to $4,697.07/oz on August 25 before entering a phase of oscillation at higher levels.

Galaxy Securities believes that recently, precious metals have stood out in the non-ferrous metals sector, with market focus shifting from the traditional rate-cut expectations to US debt risk and the revaluation of US dollar credit. The US Treasury’s stepped-up long-dated Treasury buybacks once led to a decline in the US dollar and long-end yields, further channeling funds into credit-hedging assets such as gold.

The US Treasury announced last week that it would at least double the liquidity support buyback scale for 10-year to 30-year Treasuries, raising the single auction buyback cap from $2 billion to at least $4 billion. After the news, the 30-year Treasury yield once fell about 10 basis points, and gold prices surged on the day.

The World Gold Council believes that the persistently expanding fiscal deficit means the US must issue more bonds, while some traditional buyers are becoming more cautious about dollar assets. Meanwhile, AI and data center companies are also competing for long-term capital through debt issuance. If debt or deficits do not substantially fall, relying solely on buybacks to manage the debt burden may continue to boost the appeal of gold.

US Congressional Budget Office data shows that for the first 10 months of fiscal year 2026, the US federal fiscal deficit reached $1.8 trillion, an increase of $169 billion year-on-year; during the same period, fiscal spending grew by 5%, clearly outpacing revenue growth.

Upside still requires more supporting conditions

Institutions judge that as inflation and interest rate expectations once again become key market pricing variables, gold faces a more complicated set of bullish and bearish factors, and short-term volatility may further intensify.

Dongzheng Futures believes that the precious metals market is currently influenced by both fiscal concerns and inflation risks. On the one hand, the US fiscal deficit continues to expand, long-term Treasury supply pressure is increasing, and US Treasury market intervention has instead deepened worries about the weakening of US dollar credit; on the other hand, the US-Iran situation remains stalled, and rising oil prices could trigger new inflation shocks, thereby driving up US Treasury yields.

This combination creates a complex pricing environment for gold: debt and credit concerns provide mid- to long-term support, while higher real interest rates and potential rate hike risks suppress the upside for gold. The US August Manufacturing Purchasing Managers’ Index (PMI) flash reading was 53.2, while the Services PMI rose to 56.8, indicating the US economy remains resilient. Dongzheng Futures believes the Federal Reserve’s monetary policy has not yet shifted towards easing, and future inflation and employment data could still impact rate hike expectations, posing the main constraint on further upside for gold prices.

Changes on the demand side are also positive. According to data from the World Gold Council, global physical gold ETF net inflows reached about $3 billion in July, with total holdings increasing by 23 tons to 4,068 tons; in June, global central banks made net purchases of 51 tons of gold.

UBS Wealth Management CIO Office believes that continued gains for gold prices still require three conditions: a further weakening US dollar, lower real interest rate expectations, and sustained growth in investment demand. Of these, quarterly gold ETF investment buying needs to reach about 500 tons in order to support gold prices steady above $5,000/oz or higher.

UBS maintains its year-end gold price target at $4,600/oz and sets a target of $5,400/oz by the end of September 2027. However, since the current price is already close to its year-end target, further upside in the short term may not be smooth. If the Federal Reserve resumes rate hikes, real interest rates and the US dollar could both rise, pointing to a clear downside risk for gold prices.

Editor: Zhu Henan