Gold Price Plummets as Hawkish Fed Comments Boost USD
The XAU/USD is experiencing a sharp decline, reaching fresh two-week lows at $4,375. This marks a nearly 7% drop from last week's peak near $4,700.
The downward trend is attributed to hawkish comments made by Federal Reserve Chairman Kevin Warsh at the Jackson Hole summit on Friday, which boosted the US Dollar.
Strategists at Brown Brothers Harriman note that the US Dollar has recovered most of its pullback and that policy expectations remain skewed toward further tightening.
The analysts highlight that Fed funds futures price in 67% odds of a 25bps hike on September 16, implying 60bps of tightening over the next twelve months.
Momentum indicators in the daily chart are bearish, with the Relative Strength Index (RSI) testing levels below the key 50 line and the Moving Average Convergence Divergence (MACD) having slipped below zero.