Gold continues to come under pressure after a prolonged decline, as the market failed to hold the psychological level of USD 4,000/oz.
This development suggests that buying interest remains unconvincing, while recent rebounds have been largely technical and quickly met with renewed selling pressure.
In particular, with the U.S. dollar and U.S. Treasury yields still holding at elevated levels, investor sentiment toward gold continues to be strongly influenced by expectations surrounding the Federal Reserve’s monetary policy path.
The precious metal’s four consecutive weeks of losses clearly reflect a shift in how the market is pricing risk. Following the June meeting, the Fed kept interest rates within the 3.50%–3.75% range, but its policy message remained cautious, with nearly half of policymakers leaving open the possibility of another rate hike this year.
At the same time, the Fed raised its year-end PCE inflation forecast to 3.6%, while core PCE was lifted to 3.3%, suggesting that inflationary pressure has not eased enough for the Fed to shift toward a more accommodative stance anytime soon.
For gold, this remains an unfavorable environment. When interest rate expectations stay elevated, the opportunity cost of holding gold also increases, as the metal does not generate cash flow. In addition, the strength of the U.S. dollar makes gold less attractive to non-U.S. investors. Meanwhile, gold ETF flows have yet to show a clear improvement, indicating that financial inflows remain cautious and are not yet ready to return to gold in a decisive manner.
Overall, I believe gold’s short-term trend remains tilted to the downside. After losing the psychological level of USD 4,000/oz, the correction could extend further, especially if the U.S. dollar and Treasury yields remain elevated. If the downtrend continues, the USD 3,600–3,700/oz area will be an important support zone to watch, where the market may begin to search for a new equilibrium and re-accumulate before forming a more sustainable recovery.
However, from a longer-term perspective, gold has not lost all of its underlying support. Central bank buying remains intact, as the need to diversify foreign exchange reserves and reduce reliance on the U.S. dollar continues to be a long-term trend. The issue is that, in the short term, this buying interest is not yet strong enough to offset the pressure from the Fed, the U.S. dollar, and Treasury yields. Therefore, gold may remain under corrective pressure before finding a new accumulation zone and regaining upward momentum in the medium term.
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