On Tuesday, gold was quoted near $4,460 per troy ounce, holding close to its weakest level in two weeks. The metal continues to face headwinds from rising energy prices and increasingly hawkish signals from the Federal Reserve, which together have strengthened expectations for an imminent rate increase in the United States.
Hawkish Fed Signals Lift Rate Hike Expectations
Federal Reserve Chair Kevin Warsh said the central bank will need to do more unless there is stronger evidence that inflation is returning to its 2% target. His comments markedly shifted market pricing: the implied probability of a rate hike as early as September jumped to above 65%, from roughly 36% before the remarks. Higher interest rates make non-yielding assets such as gold less attractive relative to income-bearing instruments, adding to the selling pressure on the metal.
Geopolitical Shock Waves Drive Oil Higher
Oil prices rose for a second consecutive session after the US launched strikes on an island in the Strait of Hormuz, and Iran retaliated with attacks on targets in the UAE and Jordan. The escalation in one of the world’s most critical oil transit routes has pushed crude prices higher, stoking inflation concerns. Rising energy costs reinforce the case for tighter monetary policy, an unfavourable backdrop for gold.
Technical Picture Suggests Further Downside
On the 4-hour chart, gold has broken below the upward channel at $4,460 and is forming a consolidation range around $4,433. Analysts see potential for this range to expand towards $4,500 on the upside or $4,377 on the downside, with the main scenario pointing to a further decline towards $4,320. The MACD indicator supports the bearish view, with its signal line below the centre line and trending lower.
On the 1-hour chart, the market completed a downward move to $4,395 before correcting to $4,464. It is now building a wide consolidation range beneath $4,500. A downside breakout would likely target $4,377, with scope for an extension to $4,318. The Stochastic oscillator, with its signal line below 50 and pointing down towards 20, reinforces short-term downside pressure.
August Rally Provides Context
Despite the current correction, gold enjoyed a strong August, gaining roughly 10%. The main support came from the US Treasury’s decision to double its long-term bond buybacks, which reignited demand for the so-called debasement trade and heightened concerns about the dollar’s long-term stability. Those factors remain present but are currently overshadowed by the near-term rate hike narrative.
Key takeaways
- Gold traded near $4,460 on Tuesday, close to a two-week low.
- Fed Chair Kevin Warsh’s hawkish comments lifted September rate hike probability above 65%.
- Oil prices rose after US strikes in the Strait of Hormuz and Iranian retaliation, adding to inflation risks.
- Short-term technical indicators point to further downside, with support at $4,377–$4,318.
Conclusion
Gold is caught between a strong fundamental case—August’s rally fuelled by concerns over dollar stability—and near-term pressure from a hawkish Fed and rising energy costs. The direction of the metal will depend on incoming US economic data and further geopolitical developments. For the latest price action, check the live gold price.