Rising market expectations for rate hikes and surging US Treasury yields could push gold prices down to $4,000 per ounce next week. However, Aakash Doshi, head of gold strategy at State Street Investment Management, believes that the $4,000 floor is resilient, and although the path higher has become more difficult, there is still a chance for gold to reach $5,000 per ounce within the next six months.

He noted that the Federal Reserve's tightening expectations and a stronger dollar will create short-term pressure on gold, but there is stable structural buying in the market over the medium to long term. Rising US Treasury term premiums, global fiscal imbalances, strong physical gold demand from major Asian economies, and continued allocation to gold ETFs by Western institutions are multiple underlying forces supporting gold prices, breaking the traditional negative correlation between gold and interest rates.

Short-Term Tactical Headwinds, Gold May Test $4,000 Support

Aakash Doshi stated that the market is repricing a more aggressive tightening path by the Federal Reserve, the dollar is strengthening in tandem, and gold is facing clear short-term pressure. Since mid-August, the market has priced in two additional rate hikes from the Fed, and long-end rate expectations have undergone significant adjustments. Gold is bearing the impact of the most hawkish expectations this market cycle, with rising nominal yields, higher real yields, and a stronger dollar all weighing on precious metals prices. Given the dramatic shift in rate expectations, a pullback in gold prices is not surprising.

He said: "A few more rate hikes from the Fed are indeed a short-term negative for gold, and high real yields will make the path to $5,000 more difficult." However, he emphasized that this price correction has not fundamentally changed the long-term structural outlook for gold. Rate hikes can only adjust short-term demand and cannot solve the long-term fiscal challenges of the US and major economies. Rising financing costs will amplify government debt servicing pressure and further exacerbate fiscal imbalances, which is the core reason gold prices have shown strong resilience amid the violent adjustment in global bond markets.

Doshi gave an example: before the COVID-19 pandemic, the US 10-year Treasury yield was around 1.5%. Few investors could have predicted that six and a half years later, the 10-year Treasury yield would rise to nearly 5.3%, while gold prices would still hold around $4,000. This divergence is enough to prove that beyond traditional rate logic, powerful structural factors are driving gold price movements.

US Treasury Term Premiums Surge, Fiscal Imbalance Becomes Core Variable

State Street noted in its September gold monthly report that determining the cause of rising yields is crucial. Due to fiscal imbalances, persistent inflation risks, and geopolitical uncertainty, long-term term premiums in the US, UK, France, and Germany have climbed to their highest levels since 2011. US public debt surpassed $40 trillion in August, with the most recent $1 trillion increase taking only about five months.

Doshi said there are three main factors driving term premiums higher: concerns about the credibility of policy institutions, persistent inflation pressures, and fiscal imbalances combined with increased US Treasury supply. Higher rates are essentially the market repricing the sustainability of US fiscal policy. Such risks cannot be resolved by rate hikes, and gold, as a hedge against the fiat currency system, will continue to see its long-term value highlighted.

Physical and Investment Demand Both Provide Support, Bullish Signals Emerge in Derivatives Market

Underlying gold demand remains strong, with physical and investment buying from major Asian economies providing continued support. State Street data shows that in the first seven months of 2026, non-monetary gold imports by major Asian economies reached a record 1,000 tonnes, up 78% year-on-year. Western investors have also continued to increase gold allocations during price pullbacks. September gold ETF inflow data shows institutions strategically allocating to gold to hedge against macroeconomic policy uncertainty and fiat currency risks. Western investment demand had already rebounded significantly in August, with global gold ETFs absorbing $17.1 billion that month, and US-listed gold funds seeing $7.9 billion in inflows, the strongest monthly inflow since September 2025.

The options market's positioning structure is also bullish for gold prices. Doshi noted that the long-term volatility skew remains tilted to the upside, with investors more willing to take positions betting on gold price gains. State Street's September report pointed out that gold derivatives fund flows have shifted from being dominated by put options to being led by call options, with the premium of call options relative to put options continuing to rise, reflecting institutional money's long-term bullish view on gold.

Conclusion

In summary, short-term Fed rate hike expectations and rising US Treasury yields will put pressure on gold, and prices could test $4,000 per ounce. However, the $4,000 level is solid support, and US fiscal deficits, elevated debt servicing pressure, and rising US Treasury term premiums, combined with strong physical gold imports from major Asian economies and continued global gold ETF inflows, are structural forces that will not disappear because of a few rate hikes. Although the path to $5,000 has become more winding, the upward logic over a six-month horizon remains intact. Investors need to closely track changes in long-end US Treasury yields, Fed officials' remarks, and global gold ETF fund flows to judge the depth of the gold price correction and the timing of a rebound.

Spot gold daily chart Source: Yihuitong. As of 11:17 Beijing time on September 29, spot gold was quoted at $4,135.49 per ounce.