Gold has fallen for a second straight week as rising Treasury yields and oil prices squeeze the non-yielding metal. Friday's US CPI report is now the key catalyst, with the technical picture pointing to $4,100 and $4,000 if the $4,310 support level breaks decisively.
Gold fell on Friday, leaving the metal in negative territory for a second consecutive week. This week has opened quietly, partly because of the US holiday, but the calm is unlikely to last. A busy run of economic data lies ahead, with inflation firmly in focus.
Rising oil prices, amid renewed tensions in the Middle East, are adding to inflationary pressures, while higher bond yields make non-yielding assets such as gold less attractive. Investors must therefore weigh safe-haven demand against a less supportive interest-rate environment.
Inflation takes centre stage
Following last week's surprisingly strong US jobs report, attention now turns to inflation. The payrolls figures suggested the labour market remains more resilient than recent data implied, though the print could still be revised lower next month.
The US CPI report, due Friday, is likely to be particularly important for markets, with PPI figures due Thursday alongside an expected European Central Bank rate hike. There is also growing divergence within the Federal Reserve: Chair Kevin Warsh struck a hawkish tone at Jackson Hole, while Governor Christopher Waller has taken a more cautious approach, arguing inflation data should guide the next move.
Markets are now pricing roughly a 59% probability of a September rate hike, compared with about 49% before the jobs data. A hotter-than-expected CPI reading would reinforce those expectations and could pressure gold further, particularly if Treasury yields climb. A softer print could instead revive bets that rates stay unchanged, giving gold a fresh catalyst higher.
Gold losing momentum
The second consecutive weekly decline raises the possibility that the bearish trend has returned, with the bullish run that began in early August losing momentum. The setup resembles the price action seen in March, when gold rallied away from the $4,100 area before that momentum eventually faded as selling returned.
More concerning for the bulls is the break below the $4,310 area last week, the previous low before the latest leg higher. Gold briefly broke below this level on Wednesday before reclaiming it, but Friday's bearish close has complicated that recovery.
Key levels to watch
On the upside, the $4,500 area remains an important barrier, with $4,460 also a notable resistance zone; a sustained move through $4,565-$4,600 would improve the technical picture. On the downside, a decisive break of $4,310 would open the door to $4,100 and then the psychologically important $4,000 level.
The immediate direction is likely to hinge on Friday's CPI print, with the balance of risks tilted to the downside for now.
Source: Investing.com
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