Gold prices fell below $4,000 on Thursday, marking a 28% decrease from its January peak of $5,598. This decline aligns with the appearance of the first red bar on the weekly Gaussian channel since October 2023, bolstering the argument for a confirmed bear market in gold.
Impact of Rising Oil Prices and Fed Rate Hikes
Despite ongoing geopolitical tensions, including US airstrikes in Iran and a blockage of the Strait of Hormuz, gold has failed to gain traction. Typically, such war headlines would push gold prices higher; however, this time, the surge in oil prices has been counterproductive. Oil prices have increased over 9% in just five days, fueling inflation expectations and compelling the Federal Reserve towards tightening monetary policy. As a result, market expectations for a September rate hike have climbed to approximately 76%, up from 57% a week prior, according to CME FedWatch data.
Technical Analysis of the Gold Market
The current weekly chart positions gold at a critical junction. The Gaussian channel indicator has turned red for the first time since October 2023, indicating a structural breakdown rather than a mere price dip. The price dropping below the 0.382 Fibonacci retracement at $4,333, with previous support zones now acting as resistance, suggests a significant shift in market dynamics.
With the recent 28% pullback exceeding the typical 20% threshold for bear markets, gold is now testing the 0.5 retracement level near $3,943. If it falls below this point, the next key support level will be the 0.618 golden pocket at $3,552. Additional downside levels include the $3,300-$3,400 range and the $2,575-$2,750 area, which are critical for further market analysis.
This material is informational and not financial advice.
