And with June retail sales beating expectations in June, the Fed has room to tighten. “Interest rates may be higher than people think if the Fed remains truly committed to 2% inflation,” Melek noted.

However, the Fed will eventually have to pivot away from tightening too much. “And Gold will shine when they pivot the other way,” Melek added.

Why is the $1,700 area dangerous for gold?

Since it’s been so long since gold traded below $1,700 an ounce, there are not a lot of support levels right below it, which is why an even bigger selloff could be in store, according to analysts.

Gold fell further than I had anticipated. For weeks a lot of us have been saying $1,700 was a possible level of support, which is where we are at it right now,” said Gainesville Coins precious metals expert Everett Millman. “The risk to the downside remains fairly high. It will take a bit longer for markets to fully digest the new Fed expectations and the higher dollar.”

There is a chance of gold to touch $1,600-$1,550 in the short term, but that doesn’t change Millman’s long-term outlook that gold is heading higher towards the year-end.

The last time gold traded below the $1,700 an ounce level was just before the pandemic hit. And now, it is in danger of the negative feedback loop taking prices there once again, Millman warned.

As market expectation and narrative is repriced for stronger dollar this summer, this will affect the technical outlook. The negative feedback loop is when prices fall, more technical traders will be updating the ranges and getting less bullish on gold,” he told Kitco News.

The $1,700 is a critical spot for gold, and bargain hunters are buying the dip at the moment, said RJO Futures senior commodities broker Bob Haberkorn. “Gold will struggle in this environment,” Haberkorn told Kitco News. “100bps hike from the Fed is substantial from what we used to, and it will impact gold.”

Melek added that he is watching $1,679 as the first big support level and $1,818-$1,812 as resistance levels.

Yield curve inversion could help gold

One potential positive driver for gold going forward is the yield curve inversion, analysts added.

The U.S. saw its 10-year and 2-year Treasury yields invert, meaning that yields on two-year U.S. Treasuries are now higher than yields on the ten-year. In the past, this has pointed to an upcoming recession, which is what the markets are starting to price in more and more these days.

“The difference in yields is currently bigger than at any time in the last 22 years,” Commerzbank analysts said. “Gold should really benefit from this as a safe haven. This is one reason why we anticipate higher gold prices in the coming months and quarters.”

$ 1,700 is an important place for gold, and cheap hunters buy a decline at this time, said senior commodity broker Rjo Futures Bob Haberkorn. “Gold will fight in this environment,” Haberkorn told Kitco News. “The 100bps increase from Fed is very large from what we use, and that will have an impact on gold.”

Melek added that he watched $ 1,679 as the first major support level and $ 1,818- $ 1,812 as the level of resistance.

Inversion of the results curve can help gold

One of the positive drivers for gold in the future is the inversion of the results curve, added analysts.

The US sees the results of 10 years and 2 years of turning, which means that the results in the two years Treasury US are now higher than the results in ten years. In the past, this has referred to the upcoming recession, which ranging from the market more and more today.

The current difference in results is greater than anytime in the last 22 years,” said Commerzbank analyst. Gold should really benefit from this as a safe place. This is one of the reasons why we anticipate higher gold prices in the coming months.”