Gold (XAUUSD) slides as oil soars to $100!



Gold's gains this week have now been shaved down to less than 1%.



Brent oil's resurgence back to the triple-digit handle ($100/bbl) has injected another dose of inflation fears across global markets, prompting the precious metal to unwind gains from earlier in the week.

Still, earlier this week, XAUUSD+ did respect our price target set in our previous edition of this weekly Gold report.

• Last Friday, July 17th: we highlighted the $4130 upside boundary, as per Bloomberg model's then-forecasts for this week (July 17-24)



• Wed, July 22nd: After some buy-the-dip action, XAUUSD+ closes the day at $4129.94, within just 6 cents of the $4130 upside target set on the Friday prior.

• Today (Fri, July 24): XAUUSD+ set to re-test support around the psychologically-important $4,000 level yet again, having fallen back below its 21-day simple moving average (SMA).

Trade Gold now



Why is gold tumbling at the sight of US$100 Brent oil?



First, note that the US central bank's primary tool for combatting inflation is to raise interest rates.

• As borrowing costs rise, businesses and households need to use more money to service their debt.

• The extra money needed for debt servicing also means less money available for hiring or spending.

• Should this "demand destruction" ensue (fewer people with jobs = less money for spending in the economy), then businesses are discouraged from raising their prices i.e. slows inflation down.



Second, note that gold is a zero-yielding asset, which means investors do not get paid for holding on to gold.

• As interest rates go up, investors may hunt for yield in other assets.

• For example, yields on 2-year, 5-year, and 10-year US Treasuries this week reached their highest levels since Q1 2025.

• To fund their purchases of yield-bearing assets, investors then sell off their gold i.e. gold prices fall.



TLDR:

Higher oil prices --> potentially faster inflation --> Fed has to raise interest rates --> gold goes down.



July 27-31: Where to next for Gold?



Beyond the ongoing Middle East conflict, there's yet another pivotal test for gold traders coming soon:

The Fed rate decision, and Fed Chair Kevin Warsh's press conference - both due July 29th - could determine whether or not gold can stay above $4k.

At the time of writing, markets fully expect the Fed to raise its benchmark rates by 25-basis points in September, with a 71% chance of a second Fed rate hike before end-2026.

^{Reminder: As explained above, gold tends to fall at the thought of US interest rates rising.}



POTENTIAL SCENARIOS

• UPSIDE: Gold could see a relief rally back toward its 50-day simple moving average (SMA) if Fed officials surprisingly signal their willingness to look past any potential burst of inflation, given oil's recent resurgence.

• DOWNSIDE: Gold could sink below $4k if the Fed presses home its "hawkish" message once again, stating their intent to raise US interest rates.



Over the coming week (July 24-31):

Bloomberg's model forecasts a 73% chance that Gold will trade between $3925 - $4176.



Looking further out, noting that gold has recently hit our downside targets across multiple weeks, we re-iterate:

Should the $3900-$4000 region fail to hold, last year's price action suggests little friction for further downside till the $3500-$3600 region for spot gold.







DISCLAIMER:

This article is provided for general information and reflects the author’s views only. It does not constitute investment advice, nor an offer or solicitation to buy or sell any financial instruments or digital assets. Your ability to access or use any products or services mentioned may be subject to the laws and regulatory requirements of your jurisdiction.