(Kitco News) - Despite optimism at the start of the week, gold has been unable to hold gains above $4,000 an ounce. Persistent inflation and fears that the Federal Reserve will have to aggressively raise interest rates next month have forced gold to give up all of its gains from the previous week.
Spot gold last traded at $3,884.20 an ounce, down 4.5% on the week.
With gold prices caught below $4,000 an ounce, some analysts have noted that short-term momentum points to lower prices as rising bond yields and a stronger U.S. dollar continue to weigh on the precious metal.
Carsten Fritsch, Commodity Analyst, pointed out in a note Friday that elevated inflation pressures and comments from Federal Reserve officials supporting a potential 50-basis-point hike next month are solidifying the market's hawkish bias. He added that this leaves gold vulnerable to further selling pressure.
“Since Tuesday, the price has lost almost 7% or around $290. Interest rate expectations have not risen that much since then and bond yields are still below the level of early October. The same applies to real interest rates. The risk is that ETF investors may start to sell in view of the price weakness. In this case, a further price decline would be expected,” he said.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, said that gold's inability to hold support at $4,000 has created some technical chart damage. However, he added that investors should not confuse short-term weakness with the precious metal's long-term fundamentals.
“Central banks continue accumulating bullion as part of their reserve diversification strategies, while ETF investors have demonstrated resilience despite recent volatility. These underlying sources of demand may help limit the correction but are unlikely to prevent further short-term weakness if yields and the dollar continue rising,” he said.(Kitco Global Index shows how much of today's gold move is the dollar versus the gold market itself.)
Simon-Peter Massabni, Head of Business Development at XS.com, said that gold's recent selloff reflects more than a technical correction, as investors are being forced to reassess inflation risks and the Federal Reserve's monetary policy outlook.
Massabni noted that the U.S. dollar's rally to its highest level since April 2025 and elevated Treasury yields are creating significant obstacles for gold. With the 10-year Treasury yield moving back above 5%, he said that the opportunity cost of holding the non-yielding precious metal continues to increase.
He added that gold could struggle to attract meaningful buying interest until bond yields retreat and investors become more confident that the Federal Reserve is nearing the end of its tightening cycle.
Massabni also noted that geopolitical uncertainty in the Middle East remains a potential source of support for gold, but the relationship is becoming increasingly complicated.
He explained that escalating tensions involving Iran and potential disruptions to energy supplies through the Strait of Hormuz could support safe-haven demand. However, higher oil prices could also fuel inflation, forcing the Federal Reserve to maintain its hawkish monetary policy stance.
As a result, Massabni said that geopolitical uncertainty alone may not be enough to reverse gold's recent losses. A sustainable recovery would require a weaker U.S. dollar, easing inflation pressures and a meaningful shift in interest rate expectations.
Neil Welsh, Head of Metals at Britannia Global Markets, said that with gold prices below $4,000, there is a risk that prices could drop to $3,800 an ounce, which represents the 50% retracement level of the broader two-year rally.
However, he added that lower prices remain attractive buying opportunities for long-term investors.
“Gold’s inability to hold above $4,000 is significant from a sentiment perspective, but I wouldn’t look at that level in isolation. The bigger issue for institutional investors is the sharp rise in real yields and the market’s repricing of the Fed. Gold doesn’t necessarily need lower inflation to regain its lustre; it needs the market to become more comfortable that real yields are approaching a peak,” he said.
Welsh added that broader financial market volatility could also complicate gold's near-term outlook.
“Further equity weakness could initially pressure gold if investors are raising cash and reducing risk across portfolios. If that phase passes and uncertainty remains elevated, gold’s traditional diversification characteristics may become more relevant again,” he said.
Philip Streible, Chief Market Strategist at Blue Line Futures, said that although gold prices have room to move lower, investors should start “nibbling” in the market. He pointed out that the U.S. economy continues to lose momentum, which will eventually force the Federal Reserve to end its tightening cycle.
“Looking at Producer prices, it appears that inflation has peaked, so the Federal Reserve will have some room to stop raising rates sooner rather than later,” he said. “I think the idea of a 50-basis-point hike in December is nonsense. When people realize this, that alone would help support gold.”
Jeffrey Roach, Chief Economist for LPL Financial, also sees limited scope for the Federal Reserve to aggressively tighten monetary policy next month.
In a note Friday, Roach said that while inflation remains a concern, the central bank must also consider the growing risks to economic activity.
“While some committee members may advocate more aggressive action, we should expect a 25-basis-point rate hike. Given the fragility of the broader economy, a larger 50-basis-point increase could pose unnecessary risks,” he said.
U.S. monetary policy will be an important topic next week as the release of the minutes from its monetary policy meeting held last month are released. Although the central bank left interest rates unchanged in October, two committee members voted to raise interest rates by 25 basis points.
Some analysts have said that a hawkish tone in the minutes could put renewed pressure on gold. Markets will also receive important consumption data with retail sales. Some economists have said that consumer health will be an important sentiment gauge ahead of the holiday shopping season.
Economic data to watch next week:
Monday: US Empire State Manufacturing Survey, Fed Chair Kevin Warsh to give opening remarks at a conference in San Francisco
Tuesday: US Retail Sales
Wednesday: US Pending Home Sales, Federal Reserve Minutes
Thursday: Philly Fed Survey, US Weekly jobless claims
Friday: Revised University of Michigan Consumer Sentiment
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