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 the $2,000 resistance in February 2024, peaking at $2,790 ahead of the US Presidential election. Despite a two-month pullback, the rally resumed, with bulls maintaining a strong position for most of the time. The only notable pause occurred ahead of the Jackson Hole Economic Symposium last year, when Fed Chair Jerome Powell's cautious stance on tariffs and inflation tempered market expectations.
In 2026, inflation concerns initially led to a more hawkish Fed stance, tempering gold prices in the first half of the year. However, the $4,000 level became a critical support zone after the June rate decision, particularly after Kevin Warsh's hawkish remarks. This week marked the first time gold closed below $4,000, suggesting a shift in market dynamics. Long-term buyers had previously supported this level, viewing rate hikes as short-term measures to control inflation.
Last week saw a significant inflow of capital into US Treasuries, drawing funds away from other asset classes, including gold. The absence of buyers supporting gold above $4,000 indicates a broader risk-off sentiment, driven by fears of sustained inflation and a more hawkish Fed. This could lead to a correlation between gold and stock prices as risk aversion increases.