Recently, the gold market has faced some pressure amid high energy prices and shifting expectations for the Federal Reserve's monetary policy, but its overall performance still outperforms other precious metals sectors. However, industry analysts warn that if gold prices break below key defensive levels, it could trigger a chain reaction of selling from algorithmic trading and large funds, thereby amplifying short-term downside risks.
Despite headwinds from rebounding inflation data and rising probabilities of interest rate hikes, gold has recently held the bottom of its higher trading range. Analysts point out that in the short term, gold prices are highly sensitive to macroeconomic data and news, with upcoming inflation indicators set to be the core catalysts driving market sentiment. Technically, $4,367 and $4,300 per ounce represent two crucial support levels. A breach of $4,367 would typically prompt Commodity Trading Advisors to shift towards moderate liquidation; if the $4,300 psychological mark is further broken, selling pressure from systematic funds would significantly intensify.
Although there are risks of a short-term pullback, the underlying logic supporting gold's long-term bull market remains unshaken. Expectations of US dollar depreciation, the ongoing gold-buying spree by global central banks, and the return of funds to exchange-traded funds have jointly built a solid floor for gold prices. Even if strong economic data and the Fed's hawkish stance trigger some near-term selling, this is more likely to delay the next round of rallies rather than reverse the trend.
The Federal Reserve Chair's recent hawkish remarks at the Jackson Hole Symposium indeed sent a significant shockwave through the market. His statements that inflation has not yet convincingly declined and that policy rates need to remain restrictive prompted the market to reprice, starting to factor in the possibility of continued rate hikes in September and December. Hit by the dual blow of rising short-end interest rates and a stronger US dollar, gold prices once dropped by about $125, hovering around $4,470. As front-end rates rise, the buying momentum that previously flowed in due to improved long-end liquidity has been partially offset. Industry insiders expect that by year-end, gold prices may seek support near the lower end of the $4,200 to $4,700 range.
Looking at a longer timeframe, current tightening expectations are more of a phased disruption. Once the energy market reaches equilibrium and high interest rates effectively curb aggregate demand, stabilizing inflation, the Fed's policy focus may shift back towards full employment. Against this macroeconomic backdrop, central banks, institutional investors, and physical buyers still view gold as a premium asset diversification tool, and the market is closely watching when these funds will look for better entry opportunities.
