Gold slumps below $4,350 on higher US yields, hawkish Fed bets
- Gold price falls to near $4,330 in Wednesday’s early Asian session.
- Rising yields and a firmer US Dollar create a headwind for non-yielding assets.
- Fed’s Warsh warned of having more “work to do” if inflation does not cool down to the target.
Gold price (XAU/USD) tumbles to near a two-week low around $4,330 during the early Asian session on Wednesday. The precious metal faces some selling pressure on elevated Treasury yields and a stronger US Dollar (USD).
US Treasury yields rose to their highest since January 2025 in the previous session as escalating tensions in the Middle East stoked inflation fears and triggered a global bond selloff. Bloomberg reported that the US and Iran traded a new round of attacks Tuesday, with American forces striking Iranian targets around the Strait of Hormuz and Tehran saying it had launched a retaliatory operation targeting US interests across the region.
It’s worth noting that rising interest rates and higher yields on Treasuries typically weigh on gold as they raise the opportunity cost of holding the non-yielding asset.
“We’re seeing some technical selling pressure... bond yields globally are at highs not seen in years. So that’s all working to pressure the gold market,” said Jim Wyckoff, a market analyst at American Gold Exchange.
Additionally, hawkish remarks from Federal Reserve (Fed) Chair Kevin Warsh at the Jackson Hole symposium might contribute to the yellow metal’s downside. Warsh warned last week that policymakers may need to tighten again if inflation fails to move convincingly towards 2%. Traders raise their bets on a September rate hike after Warsh’s comments.
The attention will shift to the US jobs data for August, which will be released later on Friday. This report could offer some clues about whether the Fed raises interest rates in September. Any signs of weakening in the US labour market could drag the Greenback lower and underpin the USD-denominated commodity price in the near term.
Gold positioning holds firm as Fed chair Warsh turns more hawkish
According to TD Securities, Fed Chair Warsh "struck a more hawkish tone in his Jackson Hole speech as he acknowledged the inflation concerns." Analysts at the bank note that, despite this shift in rhetoric, positioning in Gold has remained resilient, with investors seemingly looking through the renewed focus on inflation and potential future policy tightening.
Technical Analysis: Gold remains capped under the 100-day SMA
In the daily chart, XAU/USD stays bearish as spot holds beneath the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-day middle band, suggesting rallies are being capped by these overlapping dynamic barriers. The Relative Strength Index (RSI) at 46.28 hovers just below its neutral midpoint, hinting at waning downside momentum but not yet signaling a convincing recovery.
On the topside, initial resistance appears at the 100-day SMA around $4,365, followed by the Bollinger middle band near $4,445, while a stronger bullish extension would target the upper Bollinger band at $4,695. On the downside, the lower Bollinger band at $4,192 provides the next noteworthy support zone, and a daily close below it would open the door to a deeper corrective leg toward lower psychological levels.
(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.