Gold prices faced another sell-off last week as US Treasuries gained traction and tech stocks continued their decline. Next week, the Federal Reserve is widely expected to hold rates steady but hint at a hike in December. Historically, the nuances of the Fed's press conference have significantly impacted gold prices, as seen in June and July of this year.
The precious metal experienced a dramatic rise after breaking through $2,000, a level it had resisted for three and a half years. This surge was fueled by the Fed's signals of impending rate cuts, even with inflation above the 2% target. Gold peaked at $2,790 before the US Presidential election, followed by a two-month pullback and a subsequent rally that saw bulls maintain a strong position.
Gold's recent decline marks the first time in a year that it has closed below the $4,000 support level. This shift suggests a short-term versus long-term dynamic, where longer-term buyers had previously supported the level, viewing rate hikes as temporary measures to control inflation. The sell-off is driven by capital flowing into Treasuries for higher rates and fears of sustained inflation and a hawkish Fed into next year.
For near-term strategies, the $4,000 break is fresh, allowing for both bearish and bullish arguments. Key resistance levels include $4,066-4,073 and $4,100, with invalidation around $4,200. Bullish strategies would require evidence of gold reclaiming $4,000 before targeting higher resistance levels, such as $4,030.