Gold has slipped to a two-week low near $4,460 an ounce as hawkish Fed commentary and rising oil prices lift the odds of a September rate hike. Technical charts point to further downside toward $4,377 and potentially $4,320, even after the metal's strong August gain.
Gold traded around $4,460 an ounce on Tuesday, holding near its lowest level in two weeks. Rising oil prices and hawkish remarks from Fed Chair Kevin Warsh have pressured the metal, sharply lifting expectations of an imminent US rate hike.
Oil climbs, Fed turns hawkish
Oil rose for a second consecutive session after US strikes on an island in the Strait of Hormuz and retaliatory attacks by Iran on the UAE and Jordan. The rise in energy prices adds to inflation risks and strengthens the case for Fed tightening, an unfavorable backdrop for gold.
Warsh said the Fed will have more work to do unless stronger evidence shows inflation returning to its 2% target. As a result, markets now price in more than a 65% chance of a rate hike as early as September, up from about 36% before his comments.
August's rally still stands
Despite the current pullback, August was a strong month for gold, with the metal gaining around 10%. The main support came from the US Treasury's decision to double long-term bond buybacks, which reignited demand for the debasement trade and heightened concerns about the dollar's stability.
Technical picture points lower
On the H4 XAU/USD chart, the market has formed a consolidation range around the $4,433 level, with room for expansion toward $4,500 on the upside and $4,377 on the downside. Given the break below the upward channel at $4,460, a further decline toward $4,320 remains the main scenario, a view the MACD indicator supports as its signal line sits below the centre line and trends downward.
The H1 chart shows gold completed a downward move to $4,395 before correcting to $4,464, with a wide consolidation range now forming below $4,500. A downside breakout would open the way toward $4,377, with scope for a further decline to $4,318; the Stochastic oscillator backs this scenario, with its signal line below 50 and trending toward 20.
Should the H1 range break lower, the next technical level in view sits at $4,318.
Source: ActionForex
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