Gold Jumps 3% as Dollar and Yields Retreat, but Demand Picture Stays Split

Gold climbed 3.0% on Wednesday, powered by a softer US dollar and falling US Treasury yields, with Reuters also pointing to hedging demand tied to political uncertainty following Democratic gains in the US midterm elections. Spot gold settled the session at $4,046.09 per fine ounce.

The move marks a sharp reversal from the prior session, when a firmer dollar and higher Treasury yields had weighed on the metal, according to Reuters. Both nominal and real US yields declined, and Chris Weston of Pepperstone told the news agency that the dollar and rates were clear supports for bullion. The rebound had already begun to take shape on Monday, when Reuters reported a countermove after Friday's selloff as softer oil prices eased inflation worries and investors weighed signals from the Federal Reserve.

Official buyers and funds do the heavy lifting

Fresh World Gold Council data, released Tuesday, show where the real demand sits. Central banks and other official institutions bought a net 321 tonnes during the reporting quarter — a 42% increase on the same period a year earlier — bringing purchases from January through September to 675 tonnes. Gold-backed exchange-traded funds added 211 tonnes, lifting their holdings to a record 4,256 tonnes.

That institutional strength does not extend across the whole market. The World Gold Council's figures point to a divergence between official-sector and fund buying on one side and the physical investment business on the other. The council cut its 2026 growth forecast for bars and coins to 200 tonnes from 400 tonnes, citing weakening demand for those products.

The outlook for India is softer still. The World Gold Council expects the country's gold demand to come in around 650 tonnes in 2026, which would be the lowest level since 2020. Reuters cited high prices, weak jewellery demand and a poor monsoon harvest as the drags.

Data in the driver's seat

Attention now shifts to US labour market data due later this week, with investors watching for clues on the Federal Reserve's next policy step, Reuters reported. The interplay between economic releases, the dollar and yields remains the key to judging whether Wednesday's rally has legs. For now, that combination is working in gold's favour — but the uneven demand data argue against reading a single session's gain as a confirmed turn in trend.