Gold's Plunge Towards $4,320 Triggers Warning Signs
Gold prices dropped to around $4,319 on Tuesday, sparking concerns about a potential breakdown in support. The retreat came after an early Asian rebound faded as investors digested increasingly hawkish Federal Reserve commentary and a renewed rise in crude prices.
The US 10-year Treasury yield climbed by 2 basis points to 4.98% in European trading, reversing part of Monday's bond rally. This, combined with the strengthening dollar index near its seven-week high, added another headwind for dollar-denominated gold.
Despite the decline, TD Securities analyst Ryan McKay noted that gold has shown impressive resilience after the Fed's hawkish rate hike, helped by falling energy prices and a supportive broader precious-metals backdrop. However, Tuesday's oil rebound shows why that support can quickly disappear.
Gold-backed ETFs have attracted roughly 50 tonnes of inflows so far in September, putting holdings on course for a third consecutive monthly increase. A sustained break below $4,318 would expose the recent low around $4,255 and potentially the post-Fed support region near $4,235.