Gold price drops below $4,000: important support under pressure

The price of gold is again under considerable pressure. The precious metal briefly fell below the important $4,000 mark on Friday, reaching its lowest level in about three months. Investors fear that US interest rates will remain high for longer. The coming days may determine the further course of exchange.

The gold price fell slightly below $4,000 per troy ounce (31.1 grams) on Friday, but then rebounded towards $4,000. With this, gold is heading for a weekly loss of about three to four percent.

For investors, the $4,000 limit is especially important. This price level counts as a psychological support zone, where buyers can try to stop further declines. If the gold price remains below this limit for a long time, this can create additional selling pressure.

The decline is part of a broader downward movement. At the end of August, gold peaked at almost $4,700. Since then, the precious metal has lost about fifteen percent of its value.

The persistent weakness is mainly related to US interest rate expectations. As we wrote yesterday, rising oil prices and disappointing inflation rates are causing concern among investors. This increases the expectation that the Federal Reserve (Fed) will keep interest rates high for longer.

The US central bank will meet on 27 and 28 October. Although interest rates are likely to remain unchanged, traders now estimate the likelihood of a rate hike in December at more than eighty percent.

This is unfavourable for gold, because the precious metal itself does not yield any interest. This makes investments such as government bonds relatively more attractive.

29 October will also be important. Then new US PCE inflation figures appear, an important indicator for the Fed. If inflation turns out to be higher than expected again, this could put further pressure on the gold price. Meanwhile, the $4,000 limit remains an important level for investors.