Gold Slips Below $4,000 After Its Biggest Weekly Drop Since June, Just as Bank of America Warned
Spot gold fell 0.2% to $3,987.45 per ounce on Monday, extending a slide that took the metal to its lowest level since mid-July. US December gold futures were at $4,000.80. Last week was the worst for bullion since June, with a decline of roughly 4%, and gold touched a three-month low of $3,975 on Friday. The break below $4,000 is the level that Bank of America flagged earlier this month, and it arrives just ahead of a Federal Reserve meeting that markets expect to be uneventful.
How the week unfolded
According to NordFX's weekly outlook, gold settled near $4,010 on Friday, down about 4.2% on the week, after touching $3,975. RoboForex put the weekly fall at as much as 3.6% during Friday's session, with gold ending the week under selling pressure. The report from GLD News describes Monday's move as a continuation, with the metal lingering near a three-month low.
The driver was oil. Rising crude prices revived worries that inflation will stay elevated, which in turn supported expectations that the Federal Reserve will keep policy tight for longer. That lifted the US dollar and bond yields at various points in the week, and both raise the opportunity cost of holding a metal that pays no interest.
A puzzle in the bond market
Treasury yields did not rise throughout the week. The 10-year yield fell below 5% on Thursday, its largest one-day drop in more than two years, and closed the week near 5.0%, about 11 basis points lower. The dollar index held near 101.6, close to a three-week low. Normally, falling yields and a softer dollar would help gold.
NordFX explains the gap: higher oil prices revived inflation concerns and kept a December Fed rate increase in play, so rising real rates outweighed safe-haven demand. Real rates are yields minus expected inflation, and they matter more to gold than the headline yield. When traders believe the Fed will hold rates high for longer in response to energy-driven inflation, gold struggles even if nominal yields ease.
What Bank of America had said
Earlier this month, Mitrade reported that Bank of America expected gold to fall below $4,000 over the next three months and to average $4,000 in the fourth quarter. Gold has now reached that zone within two weeks of the report. Whether it stays below depends on whether the bank's other assumptions hold, including the path of rates and the strength of the dollar.
What the Fed is expected to do
The FOMC meets on 27 to 28 October, with the decision due on Wednesday at 2 pm Eastern time, followed by a press conference from Chair Kevin Warsh. Futures put the odds of an October hike at roughly 7% to 9%, down from about 52% a week earlier, according to NordFX. A December hike is priced at around 80% to 90%. That means the tone of the press conference on December may matter more to gold than the decision itself.
Thursday brings the advance estimate of third-quarter GDP and the September PCE inflation index at 8:30 am Eastern time. PCE is the Fed's preferred inflation gauge, and a hot reading would reinforce the case for a December increase.
Levels traders are watching
RoboForex lists resistance at $4,110, then $4,285 and $4,355, with support at $3,895 and then $3,675. NordFX sets a base-case range of $3,900 to $4,150, with resistance at $4,030 and $4,150 and support at $3,975 and $3,900. The stochastic oscillator is in oversold territory and has formed a bullish crossover, which suggests selling momentum may be slowing. Analysts on both sites stress that these are opinions and not guidance.
What it means for physical holders
A drop below $4,000 is a psychological milestone more than a structural one. Gold remains well above its levels from two years ago and has now fallen about 29% from the January record of $5,598.58. Buyers who accumulated near the peak face losses on paper, while those with longer holding periods or lower average costs are in a different position.
Central banks and Asian physical buyers have historically increased purchases during sharp declines, and TD Securities has pointed to strong ETF and official buying between $4,000 and $4,100. That support has not stopped the price from slipping below the zone, so patience is advisable. Staged purchases over several weeks reduce the risk of committing everything before the decision on 28 October and the PCE data on Thursday.
Practical habits matter more in volatile weeks. Compare the dealer's price per gram with the live price on Trading Economics, ask how the workmanship charge is set, and confirm buyback terms in writing. Check the purity stamp, 999 or 916, and keep the receipt with the item.
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