Gold's slide continues as buyers lose steam, technical outlook weakens

Gold has had a difficult week after a potential breakout at the end of August failed to materialise. Renewed US-Iran tensions are not assisting the metal's case. Additionally, a hawkish stance from Fed Chair Warsh at Jackson Hole weighed on the precious metal as the dollar strengthened.

With bond yields rising worldwide, gold is under renewed pressure this week.

What does the outlook hold?

The latest decline this week has pushed prices below the 100-day moving average at $4,360. Adding to the pain, the move also broke below the 50.0 Fibonacci retracement level of the July-to-August rally, which is situated around $4,328.

This indicates a more bearish bias for gold, as buyers have lost most of the momentum from the August breakout.

Some buying interest near $4,300 is providing temporary support. However, the technical outlook remains poor.

Apart from the 61.8% Fibonacci retracement level at $4,241, there is little to prevent gold from falling back to the consolidation zone around $4,000 to $4,130.

Compounding the situation, the bond market is adding further pressure. US 10-year yields have surged to 4.80%, the highest since January last year, driven by increases in bond yields in Europe and Japan as well.

This is not a single factor or purely technical matter.

The convergence of multiple factors could severely impact gold. High US-Iran tensions are contributing to a worse inflation outlook, which in turn leads to higher rates as traders anticipate central bank responses.