Spot gold fell below $4,000 per ounce last Friday, and a downtrend stretching over more than two months has pushed prices into oversold territory, beginning to attract some early attention.
However, a market analyst at Standard Chartered warned that gold must hold current levels or it could face significantly lower prices.
Gold Breaks Below $4,000, Standard Chartered Flags Critical Support
Suki Cooper, Global Head of Commodities Research at Standard Chartered, noted in the latest precious metals report that globally gold-backed exchange-traded products (ETPs) saw renewed outflows late last week, ending a period of relatively resilient investment demand.
Cooper said: "It is worth noting that this round of selling was not confined to gold but spread across asset classes, reflecting tensions triggered by tech stocks and liquidity needs as investors sought to meet margin calls or raise cash."
From a technical perspective on gold's trajectory, Cooper believes the market must hold the support level at $3,886 per ounce. A sustained break below that level could expose the market to a much deeper correction.
Although the precious metal has approached oversold territory, Cooper cautioned that downside risks remain considerable, as elevated energy prices continue to drive inflationary pressures, forcing investors to reassess expectations for U.S. monetary policy.
She added: "Crucially, gold needs to establish a bottom, because rising oil prices are keeping inflation risks in focus, and the prospect of further policy tightening is also weighing on gold."
Energy Prices Drive Inflation Higher, Fed Rate Hike Clouds Linger
Despite near-term risks, Standard Chartered remains bullish on gold's long-term outlook. The bank continues to forecast an average gold price of $4,650 per ounce in the fourth quarter, rising to $4,850 in the first quarter of 2027.
This bullish call comes against a backdrop of still-high market expectations for further Federal Reserve tightening. Standard Chartered noted that the market sees less than a 10% probability of a Fed rate hike at Wednesday's monetary policy meeting (with the decision to be announced early Thursday Beijing time), but after the U.S. midterm elections, investors have priced in an 86% probability of a rate hike in December.
Cooper observed that the U.S. ten-year Treasury yield has retreated from 5.3% earlier in the month to around 4.97%, but the pullback in yields has provided little support for gold, as investors remain focused on persistent inflation and the possibility of further monetary tightening.
Meanwhile, the U.S. dollar remains a significant headwind for precious metals. Standard Chartered said gold's three-month rolling correlation with the dollar is still negative at 47%, making the dollar one of the most consistent drivers of gold price movements.
Speculative Funds Cut Positions for Consecutive Weeks, Institutional Holdings Turn to Losses
While the macroeconomic environment remains challenging, Cooper said that from an investment positioning standpoint, the market may be approaching a potential bottom.
The report showed that speculative investors have reduced gold exposure for eight consecutive weeks, with profit-taking and long liquidation pushing positions to their lowest level since May. Meanwhile, global gold-backed ETP holdings declined by 1.3 tonnes last week, though October as a whole still recorded a slight net inflow.
Cooper estimated that at current gold prices, at least 350 tonnes of ETP holdings have entered loss territory, and the market may still be vulnerable to further liquidation. However, she also noted that some short-covering activity suggests speculative investors may be starting to look for a price bottom.
Asian Physical Demand May Become New Support
Although Western investment demand has weakened somewhat, Standard Chartered expects physical demand from Asia to provide some support in the coming weeks.
Cooper specifically mentioned that India will celebrate Diwali on November 8, which could reignite buying interest after a disappointing start to the seasonal gold market. India's gold imports fell 83% year-on-year in September to just 13.9 tonnes, the weakest monthly level since January 2023. For the first nine months of the year, imports declined 17% compared with the same period in 2025, putting India on track for its weakest full-year import record since at least 2020.
However, Cooper noted that a weaker-than-expected monsoon and elevated gold prices delayed seasonal purchasing, and demand is expected to pick up in the coming two weeks as retailers stock up for the festival season.
Meanwhile, the gold market in a major Asian country continues to show resilience: September imports surged 34% year-on-year to 144.9 tonnes, a three-month high. Year-to-date imports reached 1,286 tonnes, up 67% from the same period last year.
Central Banks and ETFs Show Strong Dip-Buying Appetite, Short-Term Volatility Hard to Calm
Cooper said that for most of this year, central banks and ETP investors have generally viewed price pullbacks as buying opportunities, which supports Standard Chartered's constructive long-term outlook.
But she cautioned that the market could remain highly volatile in the coming weeks, especially if oil prices continue to rise and inflation expectations stay elevated.
She concluded: "Our long-term view on gold remains unchanged, but if oil prices extend their rally and keep inflation expectations elevated, gold prices could continue to test a bottom in the coming weeks."
Conclusion
On one side are liquidation pressures from speculative funds and loss-making positions, while on the other are support from Asian physical demand and central bank dip-buying. Gold prices are standing on the $3,886 "lifeline." Standard Chartered's long-term bullish stance has not changed, but every dip in the near term is testing the market's patience.
Spot gold daily chart. Source: Yihuitong. As of 13:39 Beijing time on October 28, spot gold was quoted at $4,034.57 per ounce.
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