Gold’s wild October: from breaking $4,000 to a sharp pullback — what’s really driving the moves?

A quick timeline of the move

• Oct 8: Gold broke $4,000/oz for the first time, as investors piled into safe‑haven assets.

• Oct 13–14: Fresh all‑time highs above $4,100 on bets the Fed will cut rates and on renewed trade/geopolitical jitters.

• Oct 21–22: A sharp pullback from $4,400 (largest daily fall in years) as traders booked profits, the dollar strengthened, and attention turned to U.S. CPI.

What pushed gold so high?

a) Easier‑policy expectations & real yields

Markets priced in Fed cuts, while real (inflation‑adjusted) yields eased from recent peaks—supportive for non‑yielding assets like gold. As of Oct 22, the 10‑year TIPS yield sat around 1.69%, a touch lower over the month.

b) Safe‑haven demand

Trade frictions and broader geopolitical risks boosted gold’s “insurance” appeal—part of the impetus behind the early‑October breakout.

c) Central‑bank buying (China in focus)

China’s central bank (PBoC) reported continued gold purchases through September (its 11th straight month), contributing to the steady official‑sector bid for bullion. WGC’s China update also highlights multi‑quarter buying momentum.

d) ETF inflows

Physically backed gold ETFs added 634 tonnes year‑to‑date by early October, with total holdings just 2% below their 2020 peak—evidence of broad investment participation behind the rally.

So why the abrupt reversal?

After a steep, nearly one‑way run, conditions were ripe for a shake‑out:

• Positioning and profits: Momentum traders locked in gains after the record run. Reuters noted gold was on pace for its biggest daily decline in five years.

• A firmer dollar: A 0.4% rise in the DXY on Oct 21 made dollar‑priced bullion more expensive for non‑U.S. buyers, pressuring prices.

• Event risk ahead: With U.S. CPI due and the Fed in focus, traders trimmed exposure.

What we’re watching next

1. U.S. inflation & the Fed: A softer CPI and dovish Fed rhetoric would likely lower real yields/pressure the USD, supporting gold; the opposite could cap rallies.

2. Real yields: Keep an eye on 10‑year TIPS yield as a high‑frequency proxy for gold’s macro headwind/tailwind.

3. ETF flows: Sustained inflows would signal sticky investment demand after the dip.

4. Central‑bank activity: Monthly updates (especially from PBoC) remain a medium‑term anchor.

After a record‑setting sprint and a sharp pullback, gold is essentially re‑pricing as the market tests where fair value sits. Whether this proves a healthy reset or the start of a deeper correction will hinge on real yields and the U.S. dollar, with upcoming inflation/Fed signals, ETF flows, central‑bank buying, and

physical demand likely to tip the balance.

Ready to turn insights into a plan?

Join us today and explore the potential of Gold Futures Trading on CME. Register now and access cutting-edge tools tailored for traders like you.

Keep sizes small, use defined stops, and trade the plan.

Sign Up Now

Source from Reuters.

⚠️ Disclaimer:

This advertisement has not been reviewed by the Monetary Authority of Singapore. The information above is provided for general informational and educational purposes only and does not constitute financial advice. It has been prepared without regard to any person’s specific objectives, financial situation or needs. You should assess its appropriateness in light of your own circumstances or seek advice from a licensed financial adviser before making any investment decision. Past performance is not indicative of future results. Trading futures and other leveraged products involves risk, including the possibility of losses greater than the initial margin. Prices and examples are for illustration only and may change without notice. DA Financial Service (S) Pte. Ltd. makes no representation or warranty as to the accuracy, completeness or timeliness of the information, and accepts no liability for any loss arising from reliance on it.