Gold Logs Biggest Weekly Loss in Six Weeks as $4,000 Support Repeatedly Breached

International gold prices posted their biggest single-week loss in over six weeks during the July 13-17 trading period. After repeatedly testing the key $4,000/oz psychological level, spot gold ultimately lost that support. While a modest bounce on Friday was fueled by bargain buying, the overall trend remained under heavy pressure from multiple headwinds. As of after-hours trading on July 17 (ET), spot gold was around $3,981.50/oz, down roughly 2.3% from the previous week's close.^{[Kitco AM Report]} According to CNBC, gold was on track for its biggest weekly loss in six weeks as the escalating US-Iran conflict pushed oil prices higher, stoking inflation fears and reinforcing the case for the Fed to keep interest rates elevated.^[CNBC]

US-Iran Conflict Escalates: The Twin Shock of Surging Oil and Inflation Fears

The core driver of gold's pressure this week was a sharp escalation in Middle East geopolitical tensions. The US launched a fourth consecutive day of strikes on Iranian military targets and reimposed a naval blockade on Iranian ports. Iran retaliated by attacking shipping in the Strait of Hormuz with missiles and drones, declaring the waterway a "red line."^{[Kitco PM Report]} Shipping through the Strait of Hormuz was severely disrupted, with some vessels using US-controlled routes, others turning off tracking systems, and still others holding position.^{[Kitco PM Report]}

This situation directly drove a sharp rally in crude oil prices. According to Kitco, oil prices have surged over 9% in the past five trading sessions.^{[Kitco Commentary]} Brent crude held in the $84-86/barrel range this week, while WTI hovered around $79-80/barrel.^{[Kitco AM Report]} The rising oil price rekindled market fears that energy-driven inflation could keep the Fed cautious, a headwind for non-yielding gold.^[CNBC]

"As the Middle East conflict continues to escalate and the risk of another surge in energy prices looms, expectations for rate hikes could persist for some time," said Thu Lan Nguyen, Head of FX and Commodity Research at Commerzbank.^[Kitco]

Inflation Data Cools Unexpectedly, But Economic Resilience Caps Gold's Bounce

Inflation data released this week provided a brief respite for gold. The US Consumer Price Index fell 0.4% month-over-month in June, its first monthly decline since 2020, bringing the annual rate down to 3.5% from May's 4.2% — below market expectations.^{[Kitco Commentary]} This was followed by the June Producer Price Index, which fell 0.3% MoM, with the annual rate at 5.5%; core PPI rose 0.2% MoM, with an annual rate of 4.7%.^{[Kitco Commentary]}

However, the positive inflation news was quickly offset by other economic data. Thursday's reports showed US June retail sales rising 0.2% MoM, initial jobless claims falling by 8,000 to 208,000, and the Philadelphia Fed manufacturing index surging to 41.4.^{[Kitco AM Report]} These figures indicated that the US economy was not slowing noticeably, dampening market expectations for an imminent Fed pivot to easier policy.

According to Kitco, after an initial dovish reaction to the CPI and PPI data, market positioning adjusted quickly. Fed funds futures showed roughly a 90% probability of a rate hold at the July 29 meeting, but expectations for a September rate hike ticked up.^{[Kitco PM Report]} US Treasury yields subsequently rose, with the 2-year yield climbing above 4.16% and the 10-year yield reaching 4.57%. The US Dollar Index (DXY) recovered to around 100.7.^{[Kitco PM Report]}

Federal Reserve Chairman Kevin Warsh, testifying before Congress this week, reiterated the central bank's commitment to price stability and stated that policymakers have "zero tolerance" for persistently high inflation.^{[Kitco Commentary]} Although Warsh did not adopt a more hawkish stance, traders were still pricing in roughly a 49% probability of a rate hike (rather than a cut) at the September meeting, according to the CME FedWatch tool.^{[Kitco Commentary]}

$4,000 Level Lost: Technicals and Market Sentiment Deteriorate

Gold experienced a volatile week. On Monday, spot gold briefly touched a weekly high of $4,122.63 before the rally quickly faded.^[Kitco] On Tuesday, following the CPI data, gold bounced back above $4,050. Wednesday saw another brief rally after the PPI data, but the move stalled intraday. Thursday proved to be the turning point: after the strong retail sales and employment data, gold broke below the $4,000 level, hitting an intraday low of $3,969.00 before closing at $3,975.20 — a daily loss of 2.07%.^{[Kitco PM Report]}

On Friday, gold dipped further to a weekly low of $3,959.37 during the Asian session before bargain buying lifted it back. However, it failed to hold above $4,000 at the close, eventually settling at $4,015.83.^[Kitco] Technically, Kitco analyst Gary Wagner noted that gold remains capped below its 100-period moving average (around $4,077) and continues to trade within a downward channel established since the correction began. Resistance lies at $4,077 and $4,090; a sustained break above these levels is needed to open a path toward $4,140 and $4,200. To the downside, a break below the $4,000 psychological level exposes deeper support at $3,962 and $3,950.^{[Kitco Commentary]}

In terms of market sentiment, Kitco News' latest weekly gold survey showed Wall Street analysts overwhelmingly bearish on the near-term outlook for gold, while retail investor sentiment was sharply divided, appearing hesitant after gold's repeated tests of the $4,000 support level.^[Kitco]

"Gold is unlikely to stay put; it could trade in a range," said Adrian Day, President of Adrian Day Asset Management. "We are unlikely to see an upside breakout until the Fed clearly signals a 'no hike' stance. However, steady central bank buying at these levels provides support for prices."^[Kitco]

Rich Checkan, President and COO of Asset Strategies International, offered a different view: "We've tested the $4,000 support level multiple times over the past few months. It has held. I believe it will hold again. We see fresh buying interest at that level regularly. We may not be ready for a sustained rally, but above this support, I do see higher prices."^[Kitco]

Long-Term Outlook and Institutional Views: Consensus Amid Divergence

Despite the near-term pressure, most institutions remain constructive on gold's long-term prospects. According to Kitco, J.P. Morgan has set a year-end gold price target of $6,000/oz, citing record central bank gold purchases, primarily from China, India, Turkey, and Poland.^{[Kitco Commentary]}

Paul Wong, Managing Partner and Market Strategist at Sprott Inc., told Kitco News that gold tends to find support when it falls to 90% of its 200-day moving average — and it is currently well above that level — but there are other reasons to expect a late-summer rebound. "It looks remarkably similar to previous setups."^[Kitco]

However, Adam Button, Head of Forex Strategy at investingLive, struck a pessimistic note: "The tech stock sell-off is accelerating, and the risk is growing that it could engulf everything, leading to a broad 'sell everything' scenario."^[Kitco]

For now, the market remains in a tug-of-war between cooling domestic inflation data and inflationary supply shocks from abroad. Traders are closely watching the Fed's subsequent communications, shifts in rate expectations next week, and any further disruption to shipping through the Strait of Hormuz. Whether gold can sustainably reclaim the $4,000 level will be key to alleviating near-term downside pressure.^{[Kitco AM Report]}

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