Gold Price Plunges Amid Rate Hike Expectations
Gold prices have been under pressure as expectations rise for another Federal Reserve rate increase. Despite renewed geopolitical tensions and a relatively subdued U.S. dollar, spot gold fell 0.4% to $4,428.54 an ounce by 0432 GMT.
The pullback comes after a three-month high last week and follows investors preparing for a heavy run of U.S. labor-market data. Markets are pricing about a 66% probability of a Fed rate increase in September and an 89% chance of one by December, following Chair Kevin Warsh's signals that additional tightening may be needed to control inflation.
Gold bulls face a crucial test at the $4,420 support level. The short-term structure has deteriorated as sellers repeatedly rejected attempts to recover from the latest decline, with price pressing against an important support band while a descending trendline continues to cap rebound attempts.
The weak dollar could provide gold bulls with an opening, as it remains trapped in a multi-month range. Sustained dollar weakness generally improves bullion's affordability for holders of other currencies. However, a breakout toward 101-102 combined with higher Treasury yields would create a more difficult environment for XAU/USD.
Despite the near-term weakness, Goldman Sachs' $4,900 gold forecast remains in play. The bank cited continued central-bank purchases and reserve diversification as major sources of demand, and attention will turn next to the July Job Openings and Labor Turnover Survey, due at 10 a.m. Eastern time Tuesday.