Gold Prices Weaken Ahead of Crucial Fed Meeting

Gold prices continue to decline, down for a third consecutive week after falling 1.8% last week. Despite initially reacting negatively to US CPI data on Friday, gold rallied sharply from its lows before fading into the close. The precious metal ultimately finished Friday's session 0.7% higher.

The Fed meeting on Wednesday will be crucial in determining the future of gold prices. With stronger inflation data and warnings from Kevin Warsh about the risk of inflation remaining above target for too long, a rate hike could impact the gold market. The key question is whether this would be a one-and-done move or further increases later this year.

The current macro environment remains challenging for gold, with oil prices surging and US Treasury yields pushing higher. If inflation continues to rise, there's little reason for the Fed to rule out further tightening, putting additional pressure on gold prices. The 10-year yield came close to the 5% level last week, a psychologically important threshold where profit-taking could occur.

From a technical perspective, key resistance around $4,400 held once again on Friday, capping the upside. If this level is broken, gold could return to the $4,100 area, potentially around Wednesday's Fed decision. A break below that level would expose $4,000, while below there, the June low around $3,942 would come into focus.