Gold has once again declined in value.
At the time of writing, spot gold was quoted at $4,074.96 per ounce, down 1.15%, having earlier in the session fallen below $4,050. The crucial $4,000 per ounce level is now under significant pressure.
Analysts Warn a Break Below $4,000 Could Trigger Short-Term Selling
The drop in gold prices stems from current market concerns regarding potential interest rate hikes by the Federal Reserve.
One senior investment strategist noted that the primary reason for gold's decline is the expectation of rate hikes triggered by US inflation. While inflation appears moderate, tail risks from factors like rising capital expenditures and debt are prompting central banks to consider preemptive, defensive rate increases, which in turn weighs on gold prices.
A precious metals researcher added that while the Fed's June FOMC meeting kept rates unchanged, the dot plot indicated one potential hike in 2026. The hawkish stance of Fed Chair Waller has increased market expectations for a rate hike before year-end, boosting the US Dollar Index and 10-year Treasury yields, thereby pressuring precious metal valuations. Furthermore, stronger-than-expected US non-farm payrolls and inflation data for May have reduced the Fed's impetus for easing policy. Although falling oil prices might alleviate future imported inflation pressure, the current absolute level of inflation still supports a hawkish stance.
"From a capital flow perspective, the continued strong rally in the AI sector is providing 'certain' opportunities, attracting significant funds away from precious metals and into the AI industry chain, further weakening buying interest in gold," the researcher explained.
Beyond macroeconomic pressures, geopolitical dynamics have also shifted. The president of a financial derivatives investment institute pointed out, "There has been a certain degree of de-escalation in US-Iran military tensions, correspondingly weakening gold's safe-haven function."
Market data shows spot gold fell for three consecutive days from June 17 to 19, rebounded on June 22, and declined again on June 23. As of June 24, spot gold was down more than 27% from its year-to-date high.
Will Spot Gold Fall Below $4,000?
The senior strategist believes that as long as the Fed does not embark on a prolonged and aggressive hiking cycle, coupled with the risk of accelerating US debt expansion, the US dollar is likely to maintain a weaker trend over the medium to long term. Assuming demand growth momentum remains intact, even if the $4,000 level is breached, buying support is expected to emerge below it.
From a technical analysis perspective, the institute president stated that $4,000 per ounce is a critical support level for gold. He argues that the price decline from the year's high has already, to some extent, digested the negative impacts of rate hike expectations and geopolitical easing, and judges the probability of further significant declines to be low.
Potential Impact of a Break Below $4,000
"If the gold price breaks below $4,000 per ounce, it could trigger short-term selling behavior in the market. Investors holding gold, especially those using leverage, need to pay attention to risk control and guard against short-term panic selling," the institute president cautioned.
The precious metals researcher emphasized that $4,000 per ounce is currently the most important psychological barrier and lifeline for gold bulls, holding high strategic significance.
He explained, "Round-number levels themselves easily become self-fulfilling support or resistance zones. Currently, a large volume of long stop-loss orders and option-related positions are clustered around $4,000. A break below could trigger a chain reaction of programmatic stop-loss selling, creating a vicious cycle of 'selling begets more selling.'"
Should Investors Buy or Sell?
The senior strategist advised, "Although geopolitical risks persist, once they ease, oil-producing nations that previously sold large amounts of gold will regain oil revenues. Not only will selling pressure on gold decrease, but these nations may even resume increasing their gold holdings." He recommends investors stop viewing gold as a risk asset for short-term speculation, as timing the market is difficult and can lead to missed opportunities in an uncertain environment.
He believes investors should consistently define gold as a safe-haven asset, allocating it within a portfolio as a cornerstone to balance risks between stocks and bonds. At prices around $4,000 per ounce, investors can consider buying on dips and holding gold.
The institute president offered a differentiated view. He suggested consumers buying gold for its use value are less affected by price declines; holders of physical gold without leverage can maintain a wait-and-see approach. However, investors engaged in leveraged trades like futures and options need to be highly cautious, reducing positions and controlling exposure during price downturns.
He added that in the long term, the US debt burden continues to expand to a potentially unmanageable level, and global central banks are accelerating their "de-dollarization" strategies. Concurrently, the long-term structural confrontations implied by global political and military conflicts persist. Against this backdrop, gold, as a strategic asset for inflation hedging and safe-haven purposes, still possesses long-term allocation value.
The researcher concluded with a note of caution: "The current market has entered a 'technical no-man's land' characterized by high volatility and low tolerance for error. Short-term movements are highly dependent on unclear inflation data and Fed rhetoric, with neither bulls nor bears holding a clear advantage in terms of win rate or risk/reward. Without strict position discipline, encountering a chain reaction of programmatic stop-losses or a sudden macro shock could lead to rapidly失控ing drawdowns. In gold's current wide-ranging, volatile pattern, survival is far more important than being right."
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