Gold Retreats Below $4,600 as Investors Focus on Fed Chair’s Jackson Hole Remarks

Gold price (XAU/USD) experienced modest selling pressure, settling near $4,580 during Asian trading hours on Friday. The precious metal pulled back from a three-month peak as closely watched US inflation data aligned with expectations, reinforcing expectations for additional Federal Reserve interest rate increases. Market participants are now turning their attention to Fed Chair Kevin Warsh’s keynote address at the Jackson Hole Economic Symposium, seeking guidance on the central bank’s monetary policy trajectory.

The core Personal Consumption Expenditures (PCE) Price Index—the Federal Reserve’s preferred inflation metric—remained unchanged at 3.3% year-over-year in July, according to data released Wednesday by the US Bureau of Economic Analysis. This reading matched analyst forecasts precisely. On a monthly basis, both the headline PCE Price Index and the core PCE Price Index increased by 0.2% in July.

Following the inflation report, market expectations for a September rate hike strengthened considerably. Data from the CME FedWatch Tool indicates the probability of a Federal Reserve rate increase in September climbed to 40%, up from 36% prior to the data release. Higher interest rates typically exert downward pressure on gold, as the precious metal does not generate yield income and becomes less attractive to investors when borrowing costs rise.

Conversely, optimism surrounding potential diplomatic efforts to reopen the Strait of Hormuz—involving Iran and Oman—may help ease oil-related inflationary pressures, limiting gold’s downside. Iran’s Security Chief Mohsen Rezaei indicated Friday that Tehran is compiling conditions for reopening the strategic waterway in response to mediator requests, with terms reportedly including an end to regional conflicts, according to Reuters reporting.

Gold sentiment seen resilient even if Fed turns more hawkish

Analysts at TD Securities suggest that any shift in tone from Fed Chair Warsh represents a significant risk for gold prices. The bank notes that “a more hawkish tone from Fed Chair Warsh would be a catalyst for some reversal in the yellow metal.” Nevertheless, strategists contend that “the bar is likely high to reverse the improved sentiment in precious metals,” implying that substantial policy surprises would be necessary to meaningfully undermine the constructive technical backdrop for gold.

Technical Analysis: Gold price

In the daily chart, XAU/USD maintains position above its 100-day simple moving average (SMA) and the 20-day Bollinger middle band, preserving a bullish near-term bias despite the recent pullback from record highs. The Relative Strength Index (14) hovering around 65 indicates positive momentum while remaining below overbought territory, suggesting upward pressure continues although the approach to overbought levels means gains may become more gradual as price extends further from underlying trend support.

On the resistance side, immediate obstacle is the 20-day Bollinger upper band near $4,760, where previous upside extensions could encounter renewed selling pressure. For support, initial backing appears around the current area near $4,585, with stronger demand expected at the Bollinger middle band at $4,415 and the 100-day SMA at $4,375. A deeper decline toward the lower Bollinger band at $4,073.52 would only come into consideration if those trend-support levels are breached, which appears unlikely at present given the constructive daily momentum indicators.

Gold FAQs

Gold has played a key role in human history as both a store of value and medium of exchange. Currently, apart from its aesthetic appeal and use in jewelry, the precious metal is widely regarded as a safe-haven asset, making it a prudent investment during periods of economic uncertainty. Gold is also commonly viewed as a hedge against inflation and currency depreciation, given its independence from any specific issuer or government.

Central banks represent the largest holders of gold. To support their currencies during turbulent periods, central banks typically diversify reserves and accumulate gold to enhance perceived economic strength and currency stability. Substantial gold reserves can serve as a source of confidence in a nation’s solvency. According to World Gold Council data, central banks added 1,136 tonnes of gold—worth approximately $70 billion—to their reserves in 2022. This marked the highest annual purchase since records began, with emerging economy central banks such as China, India, and Turkey rapidly expanding their gold holdings.

Gold maintains an inverse correlation with the US Dollar and US Treasuries, both of which serve as major reserve and safe-haven assets. When the Dollar weakens, gold typically strengthens, enabling investors and central banks to diversify their portfolios during volatile periods. Gold also exhibits an inverse relationship with risk assets; equity market rallies tend to pressure gold prices lower, while selloffs in riskier assets typically support the precious metal.

Gold prices can fluctuate due to numerous factors. Geopolitical instability or recession concerns can rapidly drive gold prices higher due to its safe-haven characteristics. As a non-yielding asset, gold tends to appreciate when interest rates decline, while higher borrowing costs typically weigh on the yellow metal. Nevertheless, most price movements depend on US Dollar (USD) dynamics since gold is priced in dollars (XAU/USD). A strong Dollar tends to contain gold prices, whereas a weaker Dollar is more likely to propel gold prices upward.

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