Gold prices have continued their steep decline, reaching a multi-month low of $3,925 after a hawkish Federal Reserve interest rate decision dampened demand. The precious metal has fallen from its August peak of $4,700, with technical indicators suggesting further downside. A death cross pattern has formed, where the 50-day moving average crosses below the 200-day average, often signaling continued declines. Meanwhile, the Relative Strength Index (RSI) has dropped from an overbought level of 72.5, reinforcing bearish sentiment.
The sell-off in gold coincides with a surge in crude oil prices, with Brent reaching $113 and West Texas Intermediate (WTI) climbing to $104. Rising oil prices are expected to keep inflation elevated, particularly as President Donald Trump threatens military action against Iran. Analysts predict oil prices will climb further after the US midterm elections, where Democrats are favored to win control of Congress.
Inflation data released last month showed the headline consumer price index (CPI) rising 3.7%, while the core figure hit 2.7%. Similarly, both headline and core personal consumption expenditure (PCE) remained above the Federal Reserve’s 2% target. In its latest decision, the Fed held interest rates steady between 3.75% and 4%, though two officials voted for a hike. Governor Kevin Warsh emphasized that inflation remains stubbornly high, hinting at a potential rate increase in December.
Gold has historically underperformed during periods of rising interest rates and elevated bond yields, adding to the downward pressure. However, some analysts note the formation of a triple-bottom pattern, with a neckline at $4,700, which could lead to a short-term rebound.