Gold has fallen for a third straight week, down around 1% in Monday's London morning trade as a stronger dollar and rising bond yields pressure the metal. Wednesday's Federal Reserve decision could determine whether the pullback extends toward $4,100 or $4,000, though a break back above $4,400 would revive the bullish case.
Gold has started the new week on the back foot, down around 1% by mid-morning London trade. That follows a 1.8% drop last week, the metal's third consecutive weekly decline. After August's powerful surge, the rally's momentum is clearly fading, and gold could return to the $4,100 and possibly $4,000 area if macro conditions don't improve quickly.
A post-CPI recovery did not last Friday, with prices fading into the close, though the metal still finished the session 0.7% higher. Those gains have since evaporated. Oil has pushed the dollar higher and lifted rate hike expectations and bond yields, clear headwinds for non-interest-bearing assets like gold.
Fed decision could set the tone
The current trend suggests scope for further moderate losses ahead of Wednesday's FOMC meeting, an important decision after the latest inflation data and recent warnings from Kevin Warsh about the risk of inflation staying above target too long. The bigger question is not simply whether rates rise, but what follows: a one-off adjustment or the start of a renewed tightening cycle later this year. That distinction matters for gold given the metal's sensitivity to real yields and monetary-policy expectations.
Oil and Treasury yields add pressure
Oil prices have surged in recent days, despite easing slightly Friday, and gapped higher over the weekend, keeping the broader trend for crude firmly higher and adding inflationary pressure. As a result, if inflation proves stubborn, the Fed will find it harder to rule out further tightening, a shift already visible in the bond market. The 10-year yield came close to 5% last week, a psychologically important level where some profit-taking was unsurprising, though the underlying direction remains higher. Higher real yields raise the opportunity cost of holding gold, particularly if the dollar stays supported and equities come under pressure.
Key levels to watch
Technically, the bias remains to the downside. Resistance around $4,400 has held despite several tests. Today's break of short-term support at $4,324 is another sign of weakness. A move back toward $4,100 would not be surprising, potentially around Wednesday's Fed decision. A clear break below that level would bring $4,000 into view, followed by the June low near $3,942.
There is, however, another possibility. Should the dollar-debasement trade regain traction and gold break decisively above $4,400, attention would turn to the $4,500 area, then the 200-day moving average near $4,538, followed by resistance near $4,600.
Source: Investing.com
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