Gold is losing its shine for now. The price has fallen for 10 straight days and is now in a bear market. It has dropped more than 20 percent from its all time high. On March 24, gold slipped to around $4340, showing clear weakness in the market.
This fall is not happening in isolation. Multiple factors are pushing gold lower at the same time. Rising oil prices, strong inflation signals, and continuous ETF outflows are all adding pressure. The situation suggests that gold may struggle to recover quickly.
Gold price decline linked to rising oil prices and Fed rate outlook
One major reason behind the drop is the rebound in crude oil prices. After a brief dip, Brent crude has climbed back to around $100 while WTI is near $95. This surge is linked to tensions around Iran and the ongoing closure of the Strait of Hormuz.
Higher oil prices usually lead to higher inflation. Recent data already showed inflation rising even before the conflict. The Producer Price Index came in at 3.4 percent while the Consumer Price Index stood at 2.4 percent. These numbers are above the comfort level of the Federal Reserve.
Because of this, the chances of interest rate cuts are now lower. In fact, market expectations are shifting. Some traders are even pricing in the possibility of a rate hike. This is a big shift from earlier expectations of rate cuts.
Gold usually performs well when interest rates are falling or when the central bank is more supportive. But right now, the opposite is happening. Higher rates make gold less attractive because it does not offer any yield. This is one of the biggest reasons behind the ongoing decline.
Gold ETF outflows signal investor shift away from safe haven
Another strong signal comes from ETF data. Investors are pulling money out of gold funds at a steady pace. The iShares Gold ETF has seen outflows for six weeks in a row. Last week alone, it lost $1.6 billion, taking total outflows this year to $2.5 billion.
The SPDR Gold ETF is also facing a similar trend. It has recorded outflows for three consecutive weeks, with more than $2 billion leaving the fund so far this year.
This shows that investors are losing interest in gold as a safe haven. At the same time, money is flowing into Bitcoin ETFs. These funds have added over $1.6 billion this month alone. Total inflows now stand at $56 billion.
This shift suggests that some investors are moving away from gold and towards digital assets. It reflects changing preferences in the market, especially among younger and risk taking investors.
Gold price forecast remains bearish with $4000 in focus
From a technical point of view, the trend is clearly negative. Gold has fallen sharply from its peak of $5595 in January to recent lows near $4098. Although there was a small bounce, the overall direction remains downward.
The price is now below key moving averages, including the 50 day and 200 day levels. This indicates strong selling pressure. At the same time, the Average Directional Index has risen to 25, showing that the downtrend is gaining strength.
If this trend continues, gold could retest the $4098 level soon. A break below this point may open the door for further decline towards $4000 or even $3750.
For now, the outlook remains weak. Unless there is a major shift in inflation or interest rate expectations, gold may continue to stay under pressure in the near term.