China's 1,700-Tonne Gold Pipeline Underpins Bullion as Traders Rethink October Fed Move

Gold rises 0.6% to $4,167.15 as weak September payrolls cut October rate hike odds to 22%, with Chinese demand and central bank buying supporting prices.

Gold changed hands at $4,167.15 an ounce on Monday, a modest 0.6% daily advance that leaves the metal roughly 26% below the 52-week peak of $5,598.58 touched at the end of January. Friday's close came in at $4,144.04, capping a stretch of heavy losses the week before.

What has steadied the market is a dramatic reassessment of U.S. monetary policy. September's nonfarm payrolls report showed just 29,000 jobs created, far short of the 90,000 analysts had penciled in, while revisions lopped a further 60,000 positions off the July and August tallies. The unemployment rate ticked up to 4.2% from 4.1%. Against that backdrop, the CME FedWatch tool now puts the odds of another rate hike on October 28 at about 22%, down from nearly 70% previously. The Fed had lifted its benchmark by 25 basis points to a 3.75%–4.00% range only on September 16.

For a non-yielding asset like gold, the prospect of a pause in the tightening cycle removes a significant headwind, since higher yields and elevated policy rates typically make fixed-income alternatives more attractive.

Physical Demand From Asia Provides a Floor

Offsetting the macro headwinds is China's insatiable appetite for bullion. Heraeus estimates that Chinese gold imports could total 1,700 tonnes for the full year 2026, driven primarily by robust domestic investment demand. The People's Bank of China added another 20.2 tonnes in August, lifting official reserves to 2,387 tonnes.

India presents a more nuanced picture. The World Gold Council put Indian imports for August at an estimated 15 to 20 tonnes, with the import bill falling to $2.3 billion. Local discounts and ample domestic supply have dampened buying interest there of late.

Over the medium term, observers remain constructive on prices, citing continued central bank purchases, geopolitical uncertainty and resilient physical demand from both China and India.

Speculative Money Takes a Step Back

Not everyone is positioned for upside. Data released Friday by the CFTC showed institutional fund managers trimmed their net-long futures positions by 7,071 contracts to 120,318 as of September 29. Behind that pullback lie persistent rate debates in the U.S., where firm Treasury yields and a sturdy dollar have capped recovery attempts.

ANZ analysts noted that lingering inflation risks from higher energy prices could constrain the Fed's room to maneuver and temper gold's rebound potential.

Attention now shifts to the minutes of the Fed's latest meeting due Wednesday, followed by the U.S. consumer price index on October 14 — a key gauge for autumn policy decisions — ahead of the central bank's next rate decision on October 28.