The selling pressure that has accelerated in gold prices in recent weeks has brought the question, "is the decline over, or could new lows be seen?" to the forefront in the markets. As the ounce of gold trades below 4,000 dollars, some analysts assess that the downward movement could continue in the short term.
Precious metals analyst Przemyslaw Radomski stated that gold could test lower levels in the coming days or weeks. According to Radomski, the current picture does not mean that the long-term upward trend has completely ended; however, the possibility that the sell-off has not yet finished remains strong in the short-term outlook.
The analyst believes that gold could approach its lowest levels of 2026 again. Nevertheless, Radomski maintains the view that a recovery could be seen in gold and silver again after a weak trend that could last for a few weeks or months.
Among the reasons for the pressure on gold, not only interest rate expectations but also the need for cash in the markets are cited. Investors who lose money in stocks selling their other assets to provide liquidity can cause gold, which is normally considered a safe haven, to also be affected by the selling wave.
OCBC strategists, on the other hand, pointed out that despite the significant drop in US bond yields, gold has not found enough support from this development. According to the bank's assessment, the fact that the bond movement, which would normally work in favor of gold, is not reflected in prices shows that the short-term market outlook remains fragile.
OCBC states that a loosening in oil prices and an additional drop in real interest rates could be important for gold to stabilize. However, the bank is of the opinion that it is too early to shift to a more optimistic stance on short-term expectations before seeing prices react positively to these developments.
MARKET'S EYES ON FED AND INFLATION DATA
According to TD Securities Senior Commodity Strategist Ryan McKay, gold remains under pressure due to oil prices, interest rate expectations, and Fed policy. McKay also states that heavy selling by trend-following systematic funds has exacerbated the recent decline.
The fact that the barrel price of Brent crude oil closed above 117 dollars has increased concerns about energy-driven inflation. This situation has strengthened the expectation that the Fed could keep interest rates high for longer, creating additional pressure on gold.
In recent market pricing based on CME FedWatch data, the probability of the Fed raising interest rates in December is calculated at 79.4 percent. In contrast, the probability of interest rates being kept steady at the October 27-28 meeting is seen at 90.6 percent.
Weakness is also notable in the technical outlook. In FXStreet's daily chart evaluation, it was stated that gold remained below the 100-day moving average, while the relative strength index fell to the 34.13 level. This level indicates that the selling pressure is strong but that the market is also approaching the oversold zone.
In the short term, the first resistance is being watched at 4,015 dollars. If this level is exceeded, the 4,130 dollar level and then the 4,220-4,240 dollar range come to the fore. Passing these zones can be considered a signal that the downward trend is weakening.
Silver is also accompanying the weakness in gold. Maintaining the 50 dollar level in silver is seen as critical for a possible recovery. In the markets this week, the Fed's interest rate decision, the Fed Chair's messages, and the personal consumption expenditures inflation to be announced in the US will be closely watched.
News Source: 12punto
