Rate hike expectations and rising long-end bond yields are currently the two biggest headwinds weighing on gold and other investment metals, with the recent strengthening of the dollar adding another layer of pressure. However, in my opinion the longer-term case for hard assets remains intact. US and global debt-servicing costs continue to rise, with little sign of the fiscal consolidation needed to stabilise debt trajectories. Against this backdrop, demand for gold as a hedge against fiscal deterioration, currency debasement and declining confidence in fiat assets is likely to re-emerge once the current positioning adjustment has run its course.

Importantly, COMEX gold open interest has declined since Friday alongside the drop in prices. This suggests the correction has so far been driven primarily by long liquidation rather than an aggressive build-up of fresh short positions. While this does not rule out further weakness, it points to a reduction in previously elevated bullish exposure rather than a fundamental shift towards outright bearish positioning.

From a technical perspective, gold has so far retraced 38.2% of its August rally. Attention is now turning to support around USD 4,320, an area that coincides with the 50% retracement and the consolidation low established shortly before the US Treasury buyback announcement triggered the latest leg higher. A break below this area would deepen the correction and risk further technical selling. On the upside, a sustained move back above the 200-day moving average, currently near USD 4,644, would likely be needed to signal that the correction has run its course and attract renewed momentum and trend-following demand.