FX.co ★ Fixy | XAU/USD, GOLD

Gold prices (XAU/USD) fell to around $4,365 an ounce in early Asian trading on Monday, as geopolitical instability and hawkish central banks rhetoric blunted recent gains, adding pressure on prices. The main factor behind this decline was the sharp escalation of tensions in the Middle East. Reports indicated that Iran claimed to have received intelligence information indicating that Washington was preparing a new round of air strikes against it, prompting the governments of the region to prepare for a possible conflict. This increase in the geopolitical risk premium has directly impacted the gold market, raising concerns about inflationary pressures from rising oil prices, which historically exert downward pressure on non-income-producing assets such as gold. The volatile market environment forced participants to reevaluate their safe-haven asset allocations, as they temporarily favored the US dollar over gold amid fears of escalating regional conflict. Furthermore, the recent shift in monetary policy by the Federal Reserve has created significant structural headwinds for the gold market. Last week, the Federal Reserve unanimously decided to raise interest rates by 0.25 percentage points to a range of 3.75% to 4.0%. As a result, the Council issued a clear signal calling for tightening monetary policy, hinting at further tightening in the coming months to combat persistent inflation. The CME FedWatch tool showed market prices indicating a 56.5% chance of another rate hike at the central bank's October meeting. Subsequent comments from Federal Reserve officials reinforced this firm stance, indicating that the interest rate path "will continue for a longer period." It is worth noting that the President of the Federal Reserve Bank of Kansas City, Jeffrey Schmid, supported raising the interest rate, stressing that recent data showed that inflation consistently exceeds 3%, and remains “high” in a wide range of goods and services. Minneapolis Federal Reserve Bank President Neel Kashkari expressed a similar view on Sunday, stressing that inflation is a widespread phenomenon across multiple sectors, and does not depend solely on energy price fluctuations. The unanimous hawkish stance of policymakers pushed US Treasury yields higher and strengthened the dollar, creating a strong dual effect on non-interest-bearing gold. Despite these significant short-term hurdles, market strategists remain optimistic about gold's medium-term prospects. OCBC Bank analysts acknowledge that higher yields and a stronger dollar may continue to limit gold's upside potential in the short term. However, they stress that this environment does not necessarily weaken gold's overall medium-term prospects. They base this on the fact that given that the market has already internalized a tighter path for interest rates, any signs of weak US economic data may again lead to lower yields and the dollar, thus removing the main restrictions on gold, and perhaps restoring its status as an inflation hedge and a safe haven. This vision is supported by quantitative indicators. The Federal Reserve Sentiment Index rose 0.42 points to 152.09, indicating lower market expectations of a near-term interest rate cut, and an appreciation of the dollar against other currencies such as the euro and the yen.

From a technical analysis perspective, the daily chart of XAU/USD shows that the overall uptrend remains technically supported, with the price action maintaining a positive short-term slope, currently trading above the 100-day SMA at $4,320. Although the spot market price is just below the middle Bollinger Band line, the Relative Strength Index (RSI) is 51.13, which is close to neutral but slightly upward slanting, indicating that the current price action represents a moderate bullish consolidation phase and not the end of a strong uptrend. On the upside, the initial resistance level coincides with the middle Bollinger Band line (around $4,410). If the daily closing price exceeds this area, the price is expected to rise further to the upper border of the Bollinger Band indicator (about $4615), which will become the next major resistance level. In the case of a decline, the immediate support level is located at the previously mentioned 100-day moving average (about $4,320), while the lower border of the Bollinger Band indicator (about $4,200) forms deeper structural support. As long as the price remains above these levels, it is possible to maintain the overall uptrend.