Gold Slides as Fed Rate‑Hike Bets and Rising Oil Prices Keep Bears in Control

Gold (XAU/USD) opened the week on a bearish note as concerns over Federal Reserve interest‑rate hikes dominated market sentiment following a robust U.S. employment report. Energy‑driven inflation is also in focus as tensions between the United States and Iran persist. At the time of writing, XAU/USD is trading around $4,396, down roughly 0.8% on the day.

However, the metal is lacking further selling pressure as a weaker U.S. dollar limits declines. The greenback faces headwinds as broad yen strength outweighs hawkish Fed expectations and geopolitical worries. USD/JPY is near 154.50, down about 3.3% since the month began and revisiting levels last seen in February.

The U.S. Dollar Index (DXY) stands at about 98.95, down nearly 0.2% on the day, hovering near two‑week lows.

Friday’s data showed U.S. Nonfarm Payrolls rose by 162,000 in August, well above the 56,000 forecast, while the unemployment rate held steady at 4.1%.

Weekend tensions escalated after the U.S. military said it struck three Iranian oil tankers on Saturday in response to Iran firing ballistic missiles at two U.S. Navy ships.

The U.S.-Iran conflict offers little support for gold as markets focus on its inflationary impact through higher energy prices. West Texas Intermediate (WTI) is near $90 a barrel, close to its highest level since July.

Elevated oil prices add to global inflation risks, reinforcing the case for keeping rates higher for longer at a time when bond yields are already near multi‑year highs. This raises the opportunity cost of holding non‑yielding gold.

Looking ahead, gold is likely to stay sensitive to Fed rate expectations and Middle East developments. Trading could remain thin on Monday due to the U.S. Labor Day holiday. The CME FedWatch Tool puts the odds of a September 15‑16 rate hike at about 58%.

Later this week, the Producer Price Index (PPI) is due Thursday, followed by the Consumer Price Index (CPI) Friday. Hotter inflation readings would reinforce rate‑hike expectations, while softer figures could provide some relief for gold.

Technical Analysis: Sellers Retain Control Below the 200‑Day SMA

XAU/USD is trading around $4,396, below the Bollinger mid‑line near $4,466 on the daily chart and the 200‑day Simple Moving Average (SMA) at $4,536, keeping the near‑term bias bearish. Price remains above the 100‑day SMA at about $4,349 and the lower Bollinger Band around $4,258, indicating downside pressure but not disorderly. The Relative Strength Index (RSI) sits flat near 50, and a negative MACD with red histogram bars suggests momentum lacks clear bullish follow‑through. Key support levels are the 100‑day SMA at $4,349, the lower Bollinger band near $4,258, and a more significant horizontal floor at $4,000. On the upside, buyers would need to lift XAU/USD back above the Bollinger mid‑line near $4,466 to ease selling pressure, with the 200‑day SMA around $4,535 acting as a stronger cap ahead of the upper Bollinger band near $4,674.

(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.

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