The gold market has just experienced a highly volatile trading week. Despite attempts to break higher at the beginning of the week, the precious metal eventually came under pressure from rising oil prices, higher U.S. Treasury yields, and, most notably, growing expectations that the U.S. Federal Reserve (Fed) will raise interest rates at its upcoming meeting.

Let’s take a look back at the key developments from last week and prepare for a new week filled with major macroeconomic events.

Last Week in Review: Inflationary Pressure Weighs on Gold

Spot gold opened the week on a relatively positive note at around $4,422.50/ounce. Concerns over the U.S.–Iran conflict and inflationary risks stemming from higher energy prices pushed gold to its weekly high of $4,442.98/ounce on Tuesday.

However, the upward momentum quickly faded. Heavy selling pressure emerged midweek following the release of the U.S. Producer Price Index (PPI) and Consumer Price Index (CPI) reports for August. The data showed that inflation remained “hot,” reinforcing market expectations that the Fed would continue tightening monetary policy.

As a result, gold fell to a weekly low of $4,292.11/ounce, before dip-buying emerged on Friday, helping the precious metal close the week at $4,349.42/ounce, down 1.65% from the previous week.

Where Is Market Sentiment Heading?

Despite the price decline, market sentiment is showing an interesting divergence:

• Wall Street: A Kitco News survey shows that analysts are becoming more optimistic again. As many as 64% of experts expect gold prices to rise next week.

• Main Street: Retail investors, on the other hand, remain more cautious, with only a relatively narrow majority of 53% expecting gold prices to move higher.

Many analysts believe that last week’s selling pressure had already priced in much of the risk associated with the inflation data. Meanwhile, continued gold purchases by central banks and the global shift away from the U.S. dollar are still providing a solid “floor” of support for the precious metal.

This Week: A Key Week for Central Banks

This week is set to be extremely busy and potentially decisive for gold’s direction, with major central banks taking center stage.

Key economic events to watch:

• Wednesday: The U.S. August Retail Sales report, followed most importantly by the Fed interest rate decision at 2:00 p.m. ET. Futures markets are currently pricing in nearly a 90% probability of another 25-basis-point rate hike.

• Thursday: The Bank of England (BoE) monetary policy decision, along with U.S. initial jobless claims data.

• Friday: The Bank of Japan (BoJ) monetary policy decision.

What Could Happen to Gold After the Fed Meeting?

According to analysts such as Jesse Colombo and Bob Haberkorn, all eyes are on how the Fed’s actual decision compares with market expectations:

1. If the Fed Raises Interest Rates: Gold could experience a modest pullback. However, since this scenario has already been largely priced in by the market, the decline may not be particularly deep. A “buy the news” rally could even emerge as uncertainty is removed from the market.

2. If the Fed Keeps Interest Rates Unchanged: This could become a powerful catalyst for gold. If the Fed decides to remain on hold, analysts believe gold could quickly break above the psychological $4,400 resistance level and potentially target $5,000/ounce by the end of the year.

Trading Insights for a Volatile Week

With a week packed with major macroeconomic events such as the Fed’s interest rate decision, the risk of sharp price volatility is extremely high. Emotion-driven trading during such periods can easily lead to poor decisions.

To maintain an objective perspective and make more informed decisions, Ebila AI can serve as a valuable supporting tool. The platform provides market information, analysis, and solutions to help traders stay informed and better navigate fast-moving market conditions.

A professional account on Ebila AI can act as a valuable “trading assistant,” helping you stay updated as the market establishes a new direction following major economic events.

What do you think the Fed will decide this week? Can gold reclaim the $4,400 level? Share your thoughts in the comments below!

Source: Kitco