Gold prices have dropped below the $4,000 support level, marking their worst selloff since early June. Spot gold last traded at $3,992.30 an ounce, down more than 4% on the week. Analysts attribute the decline to persistent inflation, which has pushed the Federal Reserve into a tightening cycle, increasing the opportunity cost of holding gold. Although U.S. 10-year Treasury yields have fallen below 5%, technical selling and liquidity concerns continue to dominate the market.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, noted that gold is caught between short-term traders capitalizing on weaker prices and long-term investors with robust underlying demand. He highlighted that the break below $4,065 triggered further momentum-driven selling, with the next major support level at $3,970 an ounce. Hansen suggested that speculative positioning could be approaching an extreme, potentially setting the stage for a sharp recovery once the technical outlook improves.
Roukaya Ibrahim, chief commodities strategist at BCA Research, described Thursday’s selloff as an idiosyncratic event related to broader liquidity pressures rather than a fundamental shift in gold’s outlook. She noted that gold’s technical indicators suggest oversold conditions, similar to late July when prices established a short-term bottom before recovering. However, she cautioned that a stronger U.S. dollar and persistent inflation pressures could limit any meaningful rally.
Neil Welsh, Head of Metals at Britannia Global Markets, does not see the selloff as a significant shift in gold’s long-term fundamentals. He noted that central bank buying has been constant and could offer additional support. Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, expects gold prices to remain under pressure as the Federal Reserve’s tightening cycle continues to support the U.S. dollar. The main economic event next week will be the Federal Reserve’s monetary policy meeting, with markets not expecting a rate hike but keeping a December hike on the table.