Gold Prices Face Pressure as Oil, Inflation and Fed Rate Risks Rise

SEATTLE (Scrap Monster): Gold prices came under renewed pressure last week as stronger inflation data, higher bond yields and escalating geopolitical tensions weighed on investor sentiment. The LBMA Gold Price PM fell 0.7% to $4,386 per ounce, reducing its year-to-date gain to 0.5%.

Heightened tensions between the US and Iran pushed crude oil prices higher and revived concerns over persistent inflation. The dip in global inventories is expected to lead to tighter market conditions. Also, the fading demand slowdown witnessed in the second quarter of the year could further limit the market’s ability to absorb supply disruptions.

In the US, August CPI and PPI readings exceeded expectations, strengthening hopes for a Federal Reserve rate increase. Higher Treasury yields and rising 10-year real yields added pressure to gold prices. Meanwhile, global gold ETF inflows slowed and COMEX net-long positions declined.

Markets will closely watch central-bank decisions this week. Investors have largely priced a 25-basis-point Fed hike. The Bank of Japan is also expected to raise rates amid stronger wage growth. Meanwhile, the Bank of England is widely expected to hold rates steady.

Technically, gold faces support around its rising 55-day average at $4,250/oz and the 61.8% Fibonacci retracement near $4,231. A sustained break below $4,231 could expose $4,203 and $4,149, followed by the $4,000-$3,943 zone. Initial resistance stands near $4,402, with $4,538 cited as a key level for a renewed bullish trend.