- Gold fell on Wednesday, testing the $4,000-an-ounce threshold ahead of the Federal Reserve’s rate decision. Spot gold dropped 0.7% to $4,030.94 an ounce as of 2:34 p.m. in Singapore after falling as much as 0.8%, giving up most of the previous session’s gains.
- JPMorgan Private Bank’s Yuxuan Tang said the metal still faces downside risk because liquidity remains thin and rates have room to rise. “Gold will find a solid bottom when rates peak,” Tang said, calling the market “pretty fragile” with very little technical support below $4,000.
- The Fed is widely expected to hold this week, which is supportive for a metal that pays no interest, but traders are pricing a hike before year-end. Silver slid 1.1% to $53.86, platinum and palladium also fell, and the Bloomberg Dollar Spot Index rose 0.1% for a fourth day of gains.
- Physical demand is offering some support. Chinese households have stepped up buying over the past two months as prices softened, but Indian buyers are holding back during the festival season, betting the price drop has further to run.
What Happened?
Bullion slipped as the market turned to the Fed decision later Wednesday and Thursday’s release of the Personal Consumption Expenditures price index, the Fed’s preferred inflation gauge. Gold had staged a partial recovery over the past two sessions after last week’s selloff in AI-related stocks, when it fell to its lowest since mid-July as investors sold the metal to cover losses elsewhere. A rebound in tech stocks has since eased that pressure. Oil rose at the same time as the Wall Street Journal reported the US has told Gulf nations to prepare for a fresh campaign against Iran.
Why It Matters?
Gold’s trade has flipped from a war hedge to a rates story. High energy prices are keeping inflation elevated, which pushes the Fed toward more hikes, and higher real yields and a firmer dollar both work against a non-yielding asset. That leaves gold caught between geopolitical demand and tighter policy, and Tang’s view implies that the hiking cycle needs to end before a durable rally can resume.
What’s Next?
The press conference from Fed Chair Kevin Warsh and Thursday’s PCE report are the next tests, and a hawkish signal for December could push the metal back below $4,000. OCBC’s Christopher Wong said near-term risks are tilted to “further consolidation,” but that demand should provide a cushion once liquidation pressure fades. “Gold needs a combination of lower oil prices, softer inflation and a lower US dollar and yields to regain more durable upside momentum,” he said.
Affected Tickers and Coins: GLD, IAU, SLV
Source: Bloomberg
