• Gold price falls to near $4,215 in Monday’s early Asian session.
• Fed's Hammack worried inflation expectations could deteriorate.
• Hawkish Fed bets support the US Dollar and weigh on USD-denominated Gold.

Gold price (XAU/USD) drops to around $4,215 during the early Asian trading hours on Monday. The precious metal loses ground as a stronger US Dollar (USD) and hawkish signals from the US Federal Reserve (Fed) policymakers dented bullion's appeal.

Expectations of higher-for-longer US interest rates were firmed after Fed officials said additional rate increases may be needed to curb unacceptably high inflation, following September’s quarter-point hike in the benchmark rate. Cleveland Fed President Beth Hammack said on Friday that inflation risks remain high and that restrictive monetary policy should be maintained.

Additionally, Fed Governor Michael Barr said that “further policy adjustments are likely to be needed” to get inflation under control. Fed President Tom Barkin and Boston Fed President Susan Collins both backed the recent interest rate increase, citing continued inflationary pressures.

It’s worth noting that higher interest rates typically weigh on gold because the precious metal does not pay interest, making yield-bearing assets relatively more attractive.

“Focus will definitely continue to be on the interest rate situation. When we start to see markets pricing in a much more hawkish Fed, it strengthens the dollar and is negative for gold,” said Kelvin Wong, senior market analyst at OANDA.

Gold under pressure as higher oil and firm US data bolster Fed hike bets

Strategists at OCBC note that gold "slipped further to below 4250 briefly before rebounding slightly overnight," as renewed Middle East tensions pushed oil higher and "firm US data and hawkish Fed comments" kept expectations for further tightening elevated. They highlight that the "implied probability of Oct hike rose to >70% while the USD firmed," reinforcing the headwinds for the metal. Looking ahead, OCBC argues that "oil and the rates response remain the main swing factors," with "some easing in energy prices or the USD" potentially helping gold to stabilise, whereas "a further rise in yields would keep the near-term bias under pressure."

Technical Analysis: Gold maintains a negative tone below the 100-day SMA

In the daily chart, XAU/USD keeps a bearish near-term tone as price holds below the 100-day simple moving average (SMA) and the Bollinger middle band. The metal is clinging just above the lower Bollinger band support, while the Relative Strength Index (RSI) at 39.9 leans lower, suggesting fading bullish momentum rather than outright oversold conditions.

On the topside, initial resistance appears at the 100-day SMA near $4,300, followed by the Bollinger middle band around $4,340, with the upper Bollinger band at $4,462 acting as a stronger cap if a rebound extends. On the downside, immediate support is defined by the lower Bollinger band at roughly $4,218; a sustained break beneath this floor would open the way for a deeper pullback, keeping the bearish bias intact while the price remains under the clustered moving-average and volatility-band resistance overhead.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.