Gold Bounces but Bears Eye $4,243 as Fed Hawks Dominate

The ongoing US-Iran conflict and its impact on global energy flows have kept gold futures in a bearish tone, despite surging scepticism over the outcome of the UN General Assembly meeting. The 210th day without resolution to the conflict has led to continued stagflation fears, which is keeping global central banks stuck with rate hike bets.

The US dollar's strength and expectations of further Federal Reserve rate hikes aimed at corralling inflation have also dented gold futures, causing them to remain on track for a weekly decline. Fed officials, including Michael Barr, Anna Paulson, and John Williams, have reinforced the hawkish drumbeat, indicating that policymakers will likely need to deliver further rate increases to curb persistent inflation.

Chicago Fed President Austan Goolsbee warned that central bankers must treat the ongoing energy shock as a source of persistent inflation rather than a temporary supply blip. CME FedWatch data shows traders are now discounting a 70 per cent probability of another quarter-point rate hike at the Fed's October meeting, up sharply from 50 per cent prior to this week's data releases.

Gold futures have bounced back after testing the key support at $4,293.96 but are facing significant selling pressure below the key resistance at the 9 EMA ($4,357) on daily chart. The formation of a 'Bearish Crossover' with all Exponential Moving Averages (9, 20, 50 and 100) trading below the key resistance at the 100 EMA ($4,477.30) has also contributed to the selling pressure.