Gold prices (XAU/USD) tumbled on Monday following remarks by Federal Reserve Governor Christopher Waller, who indicated that a higher-than-expected Consumer Price Index (CPI) reading this week could compel the central bank to consider interest rate hikes. The pair slid nearly 3% to breach the $4,000 threshold, with traders now eyeing a retest of the yearly low near $3,900.
XAU/USD Dives as Waller Links CPI Upside to Rate Hikes
Governor Waller stated that a high core inflation print “would force near-term consideration of a rate hike.” Despite the hawkish tone, he maintained that a return to the 2% inflation target without further tightening remains credible and noted the labor market is nearing the Fed’s maximum-employment goal.
Meanwhile, geopolitical tensions continued to underpin bullion’s safe-haven appeal. The U.S. and Iran exchanged fire over the weekend despite signing a memorandum of understanding intended to sustain a ceasefire.
Attacks by Tehran on shipping vessels prompted U.S. retaliation. U.S. Central Command confirmed strikes on more than 100 military targets aimed at degrading Iranian forces near the Strait of Hormuz. Iran subsequently targeted Gulf nations hosting U.S. bases and declared the Strait of Hormuz closed to tanker traffic. Energy prices surged on supply disruption fears, with the West Texas Intermediate (WTI) benchmark climbing nearly 6% to $75.70.
Against this backdrop, markets priced in 33 basis points of Fed tightening by year-end, according to Prime Terminal data.
Catalysts for the Gold Price
Looking ahead, the release of U.S. inflation data and testimony by Fed Chair Kevin Warsh before Congress are poised to drive XAU/USD price action this week. An upside surprise in inflation combined with hawkish commentary from Warsh could accelerate expectations for a rate hike.
XAU/USD Technical Outlook: Gold Extends Downtrend Below $4,000
Price action continues to respect a series of successive lower highs and lower lows, signaling the downtrend remains intact. Bearish momentum is building, as reflected by the Relative Strength Index (RSI) approaching oversold territory.
Immediate support lies at the year-to-date low of $3,941. A break below that level would expose the October 28, 2025 swing low of $3,886, paving the way for a decline toward the $3,500 mark.
For a bullish reversal, gold must reclaim the $4,000 handle, followed by a descending resistance trendline near $4,170. Beyond that, the psychological $4,200 level looms.
