Gold is trading near $4,020, down 28% from its January record of $5,598. The metal's slide comes as the Federal Reserve's rate decision on July 29 approaches, with markets split on the outcome.
Rate Decision in Focus
The Federal Open Market Committee will announce its rate decision on July 29. CME FedWatch data shows a 64.2% probability of a hold at 350-375 basis points and a 35.8% chance of a hike to 375-400 bps. All 104 economists in a Reuters survey expect a hold, but traders are pricing in a 35.8% hike risk.
June inflation cooled to 3.5%, with core at 2.6%. Fed Chair Kevin Warsh stated he does not view inflation as 'mission accomplished' after the June report. The pause in US-Iran strikes sent oil down roughly 6% and eased inflation fears, but the Fed remains cautious.
Technical Breakdown
Gold lost the 0.382 Fibonacci retracement zone ($4,300-$4,400) in June, which now acts as resistance. The current price sits on the 0.5 retracement at $3,943, inside the $3,900-$4,000 support zone. The metal has closed below the midline of its long-term Gaussian channel for three consecutive weeks, a bearish signal.
Weekly RSI is at 37, its lowest level since late 2023. Similar levels marked major cycle lows in 2022 and 2023. The 28% drawdown meets the common bear market definition. Gold trades 10.4% below its 200-day moving average, which has flattened and turned lower.
Bollinger Band Width Percentile shows volatility fading into a squeeze, historically preceding an expansion move. The daily chart shows a descending resistance line from the $5,598 peak that has rejected price four times, converging with the $3,900-$4,000 support zone.
Central Bank Demand
Central banks bought a net 244 tonnes in Q1. A record 45% plan to add more, per a World Gold Council survey. Despite this, US-listed gold funds recorded roughly $5.3 billion in monthly redemptions. The 30-day flow change narrowed to near zero in late July, suggesting selling pressure may be easing.
If support holds and gold reclaims the trendline, the first target is $4,300-$4,400. JPMorgan's Q4 forecast is $4,500. A daily close below $3,900 would invalidate the bullish case. The next support levels are at $3,552 (0.618 golden pocket) and then $3,300-$3,400.
The FOMC decision on July 29 will be the next major catalyst. Until then, gold sits at a technical crossroads, with the descending resistance line tightening against the support zone.
