Could gold break $4,000 this week? & more related news here

• Gold remains under pressure as the strengthening US dollar and rising oil prices reinforce hawkish expectations from the Federal Reserve.
• US CPI and testimony from the Federal Reserve Chairman could determine the next important direction for the gold price.
• Gold is at risk of falling below $4,000 as bearish technical momentum continues to build.

and fell sharply in the first half of Monday’s session. The yellow metal closed in the red last week, unable to build on the previous week’s small gains. The underlying trend remains bearish. While gold may still have risen a little this month, it had fallen more than 11% in June, which was its fourth consecutive month of losses.

Therefore, the path of least resistance remains to the downside and I continue to expect a break below the $4,000 level in the near term.

It’s all about oil prices again.

Renewed tensions in the Middle East have risen again earlier this week. This has weighed on stock markets. Under normal circumstances, gold could be expected to perform better in that environment due to increased demand for safe haven assets. However, as I mentioned before, gold has increasingly traded in line in recent years, with investors treating it more as a risk asset than a traditional safe haven.

If oil prices continue to rise, that will only reinforce expectations that the Federal Reserve could continue to be more aggressive in the coming months. If that happens, I think the outlook for gold will remain tilted to the downside.

US Dollar Likely to Remain Supported

On top of that, stronger ones add more pressure. Since the new Federal Reserve chair has made clear that he wants to keep inflation under control, another rise in oil prices is likely to reinforce expectations that US interest rates will stay high for longer. Even if some of the near-term economic data softens, persistently high energy prices would make it difficult for the Federal Reserve to take a more dovish stance.

That’s one reason we’re seeing the U.S. dollar regain momentum, particularly against currencies whose economies rely heavily on imported energy, like the euro and the Japanese yen.

CPI and testimony from the Federal Reserve

As oil and prices rise, investors are increasingly reluctant to price in further Fed tightening, giving the dollar another tailwind, and this is weighing on gold’s appeal. From a data standpoint, attention now turns to a busy week for US economic data and Federal Reserve officials.

Tuesday’s inflation report will be closely watched and is expected to decline monthly. However, firmer energy prices and stickiness, still hovering between 2.8% and 2.9% year-on-year, suggest it remains premature to rule out another one before the end of the year.

Markets will also hear from Federal Reserve Chairman Kevin Warsh as he begins two days of testimony before Congress. Investors will be watching for any clues about the political outlook. The calendar also includes data on production and import prices and retail sales.

Technical analysis of gold

Looking at the gold chart, the metal has struggled in recent days to climb back above the $4,100 level and has instead remained below both the downtrend line and the 21-day exponential average. The price is now approaching the $4,000 level ahead of the US CPI release on Tuesday.

For that reason, I am looking for a break below the $4,000 level. If we get a daily close below it, then the next downside targets are around $3,900, followed by $3,800.

Resistance above the $4,100 area initially lies around $4,136, followed by $4,200 and then $4,275.

With energy prices strengthening and little evidence that the US economy is slowing enough to offset inflation risks, the fundamental backdrop continues to favor the US dollar. That leaves zero- and low-yielding assets like the yen, franc and gold particularly vulnerable.

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