Gold ended the week at around $4,017.30 per ounce, down approximately 2.5% from the beginning of the week. The $4,000-per-ounce level has become a key threshold for the short-term outlook as markets continue to assess inflation risks, oil prices, and the Federal Reserve’s monetary policy.

The $4,000 Level Remains Key Support

Over the past four weeks, gold has fallen below $4,000 per ounce several times but has quickly recovered on each occasion. This suggests that buying interest remains present around this important psychological level.

However, if gold breaks decisively below $4,000 and remains there, selling pressure could intensify. The next support levels to watch would be:

• $3,950–$3,940 per ounce

• $3,900 per ounce

On the other hand, if the $4,000 level continues to hold, gold could recover toward $4,100 per ounce.

Oil Prices and Inflation Put Pressure on Gold

June CPI data showed that U.S. inflation had cooled, helping to reduce expectations that the Federal Reserve would raise interest rates in the near term.

However, oil prices have climbed back above $80 per barrel as tensions in the Middle East continue to escalate. If energy prices remain elevated, inflationary pressure could return and force the Fed to keep interest rates higher for longer.

Rising Treasury yields and a stronger U.S. dollar are generally unfavorable for gold because the precious metal does not generate interest income.

Short-Term Risks Remain Tilted to the Downside

The main factors currently weighing on gold include:

• A stronger U.S. dollar.

• Rising U.S. Treasury yields.

• Expectations that the Fed will maintain or further raise interest rates.

• Higher oil prices caused by supply risks in the Middle East.

Markets are currently pricing in approximately a 56% probability of a Fed rate hike in September, limiting gold’s short-term recovery potential.

The Long-Term Trend Has Not Yet Been Broken

Although gold has corrected sharply from its early-year peak, many analysts still view the decline as a correction rather than a complete reversal of the long-term trend.

The fundamental drivers supporting gold include central bank purchases, geopolitical uncertainty, persistent inflation risks, and demand for protection against rising sovereign debt.

If the U.S. economy slows or energy-related inflationary pressure eases, markets may return to pricing in Fed rate cuts, which could provide renewed support for gold.

Key Events to Watch

Next week, gold could be particularly sensitive to geopolitical developments and several important economic events:

• Thursday: ECB monetary policy decision and U.S. weekly jobless claims.

• Friday: S&P Global preliminary PMI data and U.S. new home sales.

Conclusion

The $4,000-per-ounce level will be crucial for gold’s short-term direction. Holding this support could open the way for a recovery toward $4,100, while a decisive break below it could push prices toward $3,950 or $3,900 per ounce.

Although downside pressure remains, gold’s long-term supporting factors have not completely disappeared. The market will need clearer signals from inflation, oil prices, and central bank policies before establishing its next major direction.

Source: Kitco