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 began in February 2024 when the Fed signaled rate cuts, despite inflation remaining well above the 2% target. Gold peaked at $2,790 ahead of the US Presidential election, followed by a two-month pullback before resuming its rally. The $4,000 level initially acted as a speed bump but later became a critical support zone earlier this summer.
In 2026, inflation concerns led to a more hawkish Fed stance, tempering gold prices in the first half of the year. The $4,000 level was tested extensively after the June rate decision, particularly after Kevin Warsh's hawkish remarks. However, gold never closed a week below this level, until this week. This shift suggests that longer-term buyers, who viewed rate hikes as temporary measures to control inflation, may now be reconsidering their positions.
Last week saw a significant inflow of capital into US Treasuries, drawing funds away from other asset classes, including gold. The failure of gold to reclaim the $4,000 level by week's end underscores this trend. Additionally, fears of sustained higher inflation and a more hawkish Fed could strengthen the correlation between gold and stock prices as risk aversion grows.
For near-term strategies, the $4,000 break is still fresh, allowing for both bullish and bearish arguments. Key resistance levels include $4,066-4,073 and $4,100, with invalidation for the bearish theme around $4,200. On the bullish side, reclaiming $4,000 could set the stage for a bounce toward prior resistance levels, particularly if risk-off sentiment eases.