Gold Dips Below $4,000, Bank of America Advises "Buy the Dip" While Cautioning Correction May Not Be Over

Gold futures have fallen below $4,000 per ounce, closing at their lowest level in over eight months. This decline is attributed to renewed market concerns over inflation and interest rate prospects, driven by rising oil prices due to Middle East tensions and elevated U.S. Treasury yields.

While crude oil prices saw a slight retreat, they remain near one-month highs. This follows statements from Iran that Yemen's Houthi forces are prepared to close the Red Sea oil transit route if U.S. forces strike Iranian power infrastructure, keeping energy supply risks in the region elevated.

On the economic data front, following softer-than-expected U.S. Consumer Price Index and Producer Price Index readings this week, the Commerce Department reported that June retail sales rose 0.2% month-over-month. However, core retail sales, which exclude auto sales, fell 0.2%, missing expectations.

Forex.com analyst Fawad Razaqzada noted in a report that persistently high energy prices will likely make it difficult for the Federal Reserve to adopt a more dovish stance, even as some recent economic data has softened. For the same reason, investors currently favor the U.S. dollar over non-yielding assets like gold.

In contrast, technical analysts at Bank of America view the price decline as a potential buying opportunity, though they caution that the current correction may not have concluded.

Bank of America analyst Paul Ciana stated in a report that gold could remain under pressure through August and September. He added that prices might only find a more solid bottom after testing support around $3,600 per ounce.

Ciana pointed out that this gold correction has lasted only 24 weeks, which is "significantly short" relative to the preceding uptrend that spanned 121 weeks.

He suggested that lower prices would present a buying opportunity for investors, recommending they consider building a position through a phased, dollar-cost averaging approach on dips.

For settlement, the July Comex gold futures contract fell 1.4% to $3,985.60 per ounce, while the July Comex silver futures contract dropped 2.1% to $55.898 per ounce. These represent the lowest settlement prices for gold and silver since November 6 and November 26 of last year, respectively.