Gold prices could fall by 37% from their January high if they break below the USD 3,857/oz mark, with the next support at USD 3,500/oz. A stronger Japanese yen may provide some relief for the yellow metal, says the World Gold Council report.

Gold Price Correction Looms

Gold could see a deeper correction if it breaks below USD 3,857/oz, with the next major support at USD 3,500/oz -- a level that would mark a decline of around 37 per cent from the January high, while stronger yen may provide some relief, according to a report by World Gold Council.

"Should weakness extend below US$3,857/oz we would see the next major support at the April/October range high at USD 3,500/oz. This would represent a decline of approximately 37 per cent from the January high which would be consistent with previous major downturns in Gold, and we would thus be alert to a more important floor being found here," it said.

Yen's Role in Supporting Gold

As per World Gold Council, the Japanese yen's surge, supported by the first coordinated US-Japan intervention in the currency markets, could also lend support to gold. "A stronger yen and a weaker dollar could support gold if these trends persist," it said.

Recent Market Performance and Influences

At the time of reporting, the yellow metal was trading at around USD 4,063.80/oz. According to the report, the London Bullion Market Association (LBMA) Gold Price PM fell 1 per cent last week to USD 4,027 per ounce, taking its year-to-date decline to 7.8 per cent.

Gold prices were influenced by changing interest rate expectations after the US Federal Reserve kept rates unchanged in a 9-3 vote, while developments in the US-Iran conflict kept oil prices and inflation concerns in focus. As investors reassessed the market outlook, inflows into gold ETFs moderated and net long positions on COMEX declined. Meanwhile, options traders cut bearish positions, partly due to the expiry of contracts, it further noted.

Key Technical Levels

It further noted, while gold extended tight consolidation of the past month, it is still capped below its downtrend from early March. "Below US$3,943/oz would be seen to resolve the range lower with the next key technical support at US$3,857-3,887/oz," it said.

Future Market Drivers

According to World Gold Council, investor expectations for the Fed's policy path will remain a key driver of gold. "This week, expected strength in manufacturing (Mon) and services PMIs (Wed) in July could reinforce expectations of a more hawkish Fed. However, July payroll additions (Fri) are expected to remain subdued, while signs of easing US-Iran tensions, underscored by Trump's announcement of fresh negotiations, may help temper concerns over further rate hikes," the report noted. (ANI)

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