Gold prices faced significant selling pressure on Thursday, testing the $4,500 per ounce level. Investor sentiment has been dampened by a more hawkish posture from the U.S. Federal Reserve and renewed inflation concerns stemming from geopolitical tensions in the Middle East. Expectations for imminent interest rate reductions have largely evaporated for the time being.
Geopolitical Tensions Fuel Inflation Worries
Additional headwinds for the precious metal are emerging from the energy sector. Reports of damaged infrastructure in the Middle East have driven up the cost of oil and natural gas. Given that energy expenses are a primary component of inflation, this development has stoked fears of persistent price pressures. In response to this environment, institutional investors are prioritizing liquidity. A notable shift of capital is occurring out of gold-backed exchange-traded funds (ETFs) and into the energy sector as a hedge against rising fuel costs.
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Federal Reserve Policy Shifts Expectations
While the U.S. Federal Reserve maintained its benchmark interest rate within the 3.50% to 3.75% range, it revised its projections for the remainder of 2026 upward. Market participants now anticipate that the first rate cuts will not materialize until the latter half of the year. Gold, which offers no yield, is particularly sensitive to the prospect of extended periods of high returns on government bonds and a robust U.S. dollar. The adjusted outlook for monetary policy has directly contributed to the metal’s current weakness.
Technical Levels Under Scrutiny
From a chart perspective, key technical support levels are being challenged. The sustained selling activity indicates a shift in short-term market dynamics, with traders closely monitoring whether these levels will hold.
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