Gold continues to hold $4,000, which could signal an inflection point, analysts say

Gold has managed to hold critical support near $4,000 an ounce for the past five consecutive weeks, and although significant downside risks remain, some analysts see growing potential for a bullish shift in the market. Analysts note that although gold has been unable to hold gains above $4,100 an ounce, it has faced only limited selling pressure despite significant headwinds. The precious metal has held critical support even as oil prices climbed to their highest level in nine weeks. Oil prices moved higher this week as the war in Iran intensified, with the ongoing global energy crisis continuing to fuel inflation fears, forcing central banks around the world to adopt more hawkish policy biases. The Federal Reserve's monetary policy meeting will be the main economic event next week; however, some analysts say the decision could have only a limited impact on gold as the central bank continues to navigate a difficult path between persistent inflation and fragile economic growth. Although markets are not expecting the Federal Reserve to raise interest rates next week, policymakers could lay the groundwork for a rate hike before the end of the year. At the same time, analysts note that markets are still adjusting to Federal Reserve Chair Kevin Warsh's approach of providing less forward guidance. Lukman Otunuga, Senior Market Analyst at FXTM, said that with so much uncertainty surrounding U.S. monetary policy, much will depend on inflation data. "Markets are now pricing a 34% probability of a July hike, leaning heavily towards a September move. Fresh US tariffs of 10%–12.5% on imports from major trading partners add another layer of uncertainty, threatening second-round inflation effects that give the Fed even less room to stand down. The week ahead is loaded with more geopolitics, the Fed decision and PCE price index which may influence how gold ends July. A hot print may pour fuel on September hike bets and put $4,000 firmly back in play as a downside target. Any signs of cooling price pressures could offer gold a potential lifeline. However, with oil lingering around $100, the window for sustained relief is narrow," he said. "Ultimately, the $4,000 level remains the structural floor to watch. A clean break below opens the door toward $3,950 and $3,900. If this level holds, gold may rebound toward $4,100 and $4,200." Although rising interest-rate expectations could weigh on gold, some analysts believe the ongoing conflict in the Middle East is creating a potential inflection point for the precious metal. "If higher oil prices continue to fuel inflation while simultaneously weighing on economic activity and labor market conditions, concerns about slowing growth may eventually outweigh inflation fears," said Simon-Peter Massabni, Head of Business Development at XS.com. “At that stage, investors are likely to rotate back toward defensive assets, with gold standing to benefit, particularly if markets begin pricing in a future easing cycle from the Federal Reserve.” "In the short term, U.S. Treasury yields and the dollar will continue to dominate price action,” Massabni added. “Over the medium to long term, however, a broader structural shift is unfolding, driven by sustained official-sector demand, the rising influence of Asian markets, and a gradual evolution in the global price-discovery process. In that environment, I view any meaningful price corrections, provided these structural drivers remain intact, not as the beginning of a prolonged bear market, but as potential opportunities for long-term investors to rebuild strategic positions." Thu Lan Nguyen, Head of Commodity Research at Commerzbank, also sees the potential for a shift in the gold market as the precious metal continues to show resilience. "If fears grow of a sustained escalation of the conflict in the Middle East, and thus a prolonged closure of the Strait of Hormuz and, in the worst case, also the Strait of Bab al-Mandab, a massive energy cri...