Gold is losing ground again as rising oil prices, elevated bond yields and inflation concerns weigh on the metal. Central bank buying offers a cushion, but the analysis says $4,100 is the level to watch.
Gold's latest rebound is struggling to gain traction, with the metal losing ground again as the European session gets underway. The analysis says the near-term balance of risks still points to the downside.
Gold's bearish momentum holds
Gold fell 0.67% last week, extending a slide that has produced just two weekly gains over the past eight weeks. The metal continues to find support around $4,100, but holding a key level is not the same as establishing a bottom.
Oil and yields squeeze the metal
Persistent inflationary pressures and a renewed surge in oil prices are fuelling expectations that central banks may have to keep policy tighter for longer, or even raise rates further. That has kept government bond yields close to recent highs.
The US 10-year Treasury yield remains above the 5.00–5.05% area. Higher yields increase the opportunity cost of holding gold, which offers no income, and make bonds a more attractive alternative.
Geopolitics adds another layer. Concerns about a possible US attack on Iran have revived the geopolitical risk premium, and disruption around the Strait of Hormuz has already put pressure on oil supplies. For gold, the source notes that anxiety is not necessarily bullish: if it drives oil prices and bond yields higher, the resulting inflation shock could outweigh demand for a traditional safe haven.
Central bank purchases cushion the decline
Still, continued purchases by central banks, including the People's Bank of China, remain an important source of structural demand. That buying has helped cushion gold's decline.
China's economy grew by 4.5% year on year in the third quarter, beating expectations of 4.4% and accelerating from 4.3% in the previous quarter. However, stronger Chinese growth may support gold demand without neutralising the pressure from higher yields and inflation expectations.
Key levels: $4,100 and $4,223–$4,260
Gold recovered from the $4,075–$4,100 area in the middle of last week, but Friday's reversal lower raises the possibility that the bounce has run its course. The descending trend line continues to cap the recovery.
A break above that trend line would be an initial sign that bearish momentum is fading, yet gold would still need to clear resistance at $4,223–$4,260 before a more meaningful bottom had formed. A break below $4,100 would expose the market to a test of the $4,000 threshold, particularly if oil prices remain elevated and Treasury yields resume their climb.
Source: Investing.com
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