Quick overview
- Gold’s recent decline shows signs of losing momentum as buyers defend the $4,200-$4,300 support zone despite macroeconomic pressures.
- Geopolitical tensions, particularly involving Iran and Yemen, are providing support for gold as a safe-haven asset.
- Persistent demand from China is helping to stabilize gold prices, although it may not be enough to trigger a significant rally.
- Gold’s ability to maintain levels above $4,000 is crucial for preserving its longer-term bullish outlook.
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Gold’s decline from its recent highs is showing signs of losing momentum as buyers defend the $4,200-$4,300 support zone despite a stronger dollar, higher interest rates and renewed geopolitical uncertainty.
Gold Reverses After $4,700 Failure
Gold surged toward $4,700 in late August before suffering a sharp reversal below $4,300. However, sellers have struggled to extend the decline over the past three weeks, suggesting downside momentum may be weakening.
The metal has since stabilized, with buyers continuing to defend the important $4,000 area. Technical support between $4,200 and $4,300 has also attracted demand, keeping the broader uptrend from deteriorating despite a less supportive macroeconomic backdrop.
The Federal Reserve delivered a 25-basis-point rate hike, lifting rates from 3.75% to 4.00%, while the Bank of Japan raised its rate from 1.00% to 1.25%. The moves, combined with a stronger dollar and hawkish signals from Federal Reserve Chair Kevin Warsh, have created additional pressure on non-yielding bullion.
Stronger employment data has also reinforced expectations that interest rates could remain restrictive for longer, potentially limiting gold’s upside in the near term.
Geopolitical Risks Remain Elevated
Geopolitical developments are providing another source of support for safe-haven demand.
Iran’s security chief Mohsen Rezaei said Tehran had communicated conditions for ending the war to Washington through Qatar mediation. The conditions reportedly include an end to the conflict on all fronts, the unfreezing of Iranian funds and an end to the U.S. military blockade of Iranian ports.
Rezaei also said Iran had recently tested a new anti-ship ballistic missile and could use it if the conflict returns to an all-out war.
Meanwhile, Yemen’s Houthis claimed attacks against sensitive sites in Riyadh using ballistic missiles and drones, as well as an Aramco facility in Yanbu. Saudi-led coalition forces said the attacks were thwarted and did not hit their targets.
Washington has urged citizens across nine Middle Eastern countries to exercise caution, warning that Saudi-Houthi hostilities could escalate rapidly.
Chinese Demand Supports Gold
Persistent Chinese demand remains an important support for the gold market.
Continued physical buying in China has helped offset some selling pressure generated by higher interest rates and a stronger dollar. If financial investors remain cautious, physical demand could become increasingly important in maintaining the metal’s floor.
However, Chinese demand alone may not be sufficient to sustain another major rally if global monetary conditions become significantly more restrictive.
Gold Faces a Critical Technical Test
Gold’s failure near $4,700 remains an important warning sign after the powerful August rally. Holding above $4,000 would help preserve the longer-term bullish structure, while renewed support below $4,300 has been forming on the market.
For now, gold remains caught between persistent Chinese demand and safe-haven flows on one side, and higher oil prices, a stronger dollar and renewed Fed tightening risks on the other. Until monetary-policy pressure eases, another attempt at $4,700 may prove difficult.
Technical Outlook Is Still Bullish
China Reports Gold and Silver Discovery
Chinese researchers have also reported identifying a large underwater mineral deposit in the western Pacific containing significant concentrations of gold and silver.
An 18-day expedition involving researchers from Tsinghua University, the Qingdao Institute of Marine Geology and Shanghai Jiao Tong University surveyed a high-temperature hydrothermal field and identified three large sulfide mounds.
Preliminary analysis reportedly found gold concentrations of up to 0.45 troy ounces per short ton of ore, while silver grades reached 36.3 troy ounces.
The discovery is unlikely to affect global supply in the near term. Deep-sea mining remains technically challenging and environmentally controversial, meaning any potential commercial development would likely take considerable time.
For now, gold’s ability to hold $4,200-$4,300 remains important. A sustained defense of this zone could signal that the recent correction is losing momentum, while a breakdown would reopen the risk of deeper declines.
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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank’s local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.