Gold Price Stuck in Bearish Trend as Fed's Hawkish Tone Continues
The gold price has been stuck in a bearish trend, failing to gain significant traction despite a modest recovery attempt in the European session. The precious metal remains below $4,150 and is within striking distance of its lowest level since August 4. This lackluster performance can be attributed to the prevailing hawkish tone from the Federal Reserve (Fed), which has led to higher bond yields and a stronger US Dollar (USD).
The Fed's recent rate hike and signals of further interest rate increases have been accompanied by warnings from influential FOMC members, including Cook, who highlighted persistent inflation risks stemming from artificial intelligence and geopolitical tensions. This hawkish bias is driving USD demand and capping the gold price.
Furthermore, US President Donald Trump's rejection of a peace proposal from Iran to resolve their military conflict has kept the geopolitical risk premium in play, fueling inflationary concerns and pushing US bond yields to multi-year highs. As a result, traders are advised to wait for strong follow-through buying before confirming that the gold price has bottomed out.
The upcoming US macro releases, including the Personal Consumption Expenditures (PCE) Price Index, final Q2 GDP print, ISM Manufacturing PMI, and Nonfarm Payrolls report, will be closely watched for cues about the Fed's future policy path and their impact on the gold price.