Gold prices fall below $4,000 for first time since July
What's the story
The price of gold has fallen below $4,000 per ounce for the first time since July. The precious metal hit a low of $3,986.85 on Friday. Just three weeks ago, a major Wall Street bank had predicted that this level would act as a floor for gold prices. Now, banks and analysts are divided on how much further gold prices could decline.
Selloff analysis
'Liquidity-driven selloff'
Justin Lin of Global X ETFs described the recent market downturn as a "liquidity-driven selloff."
He explained that in sharp downturns, investors often sell gold to cover margin calls.
The same AI concerns that have triggered sell-off in tech stocks could also provide some relief for gold prices.
This is because they have reduced expectations for another Federal Reserve rate hike, with Bloomberg reporting odds below 10% for next week.
Price forecast
Gold is down 7.4% from January level
As of now, gold is trading at $4,002, down 7.4% from its January 1 level. This decline challenges earlier predictions of $4,000 support for the metal.
Banks and mining executives have different views on how far gold prices could fall from here.
Morgan Stanley's Amy Gower had previously predicted that $4,000 would serve as a floor for gold prices due to central bank buying and lower bond yields.
Buying trend
Central banks continue buying gold despite price drop
Despite the decline in gold prices, central banks have continued their buying spree.
Goldman Sachs estimated that central banks bought 79 tons of gold in August.
Provisional data from the World Gold Council cited by the Financial Times puts September buying at around 63 tons so far, marking the highest level since November 2024.
Future outlook
Analysts divided on gold's future
Below the $4,000 mark, Lin sees the next critical test at $3,900.
Bank of America has set its line even lower, earlier flagging a possible low of $3,750. It also forecasts a fourth-quarter average price of $4,000.
However, some analysts expect gold to recover quickly from here.
Lin sees a V-shaped rebound, citing lower rates, a faltering AI trade, and a weaker dollar.