Gold price bounces off a two-month low as PBoC buys for a 23rd straight month

Gold got bought this week at its two-month low, and the buyers that matter are central banks. Spot gold was changing hands near $4,171 in early trading today, a gain of about 0.9 percent, with December Comex futures near $4,221, after the metal held a $4,065 to $4,080 support zone through hawkish Federal Reserve minutes (Vantage, Oct 9).

The week opened with gold pinned to its weakest level in two months. Minutes from the September FOMC showed all 19 officials backing the quarter-point hike to 3.75 to 4.00 percent, and most seeing another before year-end, while the 10-year Treasury yield pressed toward 5.3 percent (Vantage, Oct 9). That pushed the metal to a two-month-low zone around $4,065 to $4,080, with an October 7 wick low near $4,065 putting support on the table (Vantage, Oct 9).

Related reading: Gold price holds near $4,100 after a two-month low: central banks keep buying.

The floor held. A strong 30-year Treasury auction eased yields and the dollar softened to about 102, and an early bounce today lifted spot toward roughly $4,171, with December futures at $4,221 (Yahoo Finance; Vantage, Oct 9). Resistance sits near $4,220, the recent wick high, with the metal trading in a $4,065 to $4,220 box since late September (Yahoo Finance; Vantage).

What makes this dip different is who bought it. The People's Bank of China added 740,000 ounces in September, roughly 21 to 23 tonnes, its 23rd straight month of accumulation, timed precisely as prices weakened (Yahoo Finance; Vantage; Andorra Metals, Oct 8). The World Gold Council tallied plus 39 tonnes of net central-bank buying in August across official purchasers, easing from plus 43 tonnes in July but confirming that official demand continues to floor corrections (Andorra Metals). The read: central banks are steadying the metal on pullbacks, while short-term direction stays in the Fed's hands.

For the broader framework, see our gold coverage.

Related reading: Gold Holds Steady Above $4,400 as Silver Outperforms on Industrial Demand.

Silver is the week's divergence. Spot was recovering toward about $60.6 in early trading today after a 1.9 percent Thursday dip to near $59.4, yet the CFTC report for the week ended September 29 shows managed-money net length in silver collapsed about 43 percent to plus 7,614 contracts from plus 13,309 the prior week, a sharper unwind than gold's drift to plus 120,318 (CFTC, Commitments of Traders; Satdish breakdown; InsiderStreet, COT report). That is a classic heightening setup: the price is firm, but the speculative conviction that drove it is gone. The Silver Institute still flags a sixth consecutive year of supply deficit, with output largely by-product-driven and slow to respond (Yahoo Finance).

The next Fed-path evidence is October 14 CPI. August CPI ran at 3.4 percent year over year and the Q4 nowcast has jumped to 4.14 percent, so an upside print would reprice the 2-year and revive near-term hike calls that pressure the zero-yield metals (Vantage; Yahoo Finance). Markets currently price roughly 78 to 86 percent odds of a December hike and a firm hold in October (CME FedWatch, via Vantage). Central-bank buying builds a floor under gold on any dip, but until CPI lands, the metal trades range-bound around $4,065 to $4,220 with silver's positioning unwind keeping it the weaker of the two.

Related reading: Silver's 3.1% Advance and the Supply Through-Line Across Metals.

Related reading: Gold and silver hold the line into the rate pullback; copper sits at the month high.

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