Gold Slumps to Two-Month Low Amid Strong Dollar and Fed Hike Bets

Gold prices hit a two-month low near $4,100 on Tuesday, as the US Dollar's strength and lingering Federal Reserve rate hike expectations weighed on the precious metal. The USD paused its recent rally, offering some support to gold, while reduced odds of an October Fed rate hike provided mild relief. However, the broader outlook remains bearish, with moderating inflation and cooling labor market data easing pressure on the Fed to tighten policy further.

Economists at Deutsche Bank noted that despite softer payrolls, the labor market remains resilient, maintaining their forecast for two more 25 basis point Fed hikes. Markets are pricing in an 85% chance of another rate hike by year-end, despite recent moderation in expectations. Persistent geopolitical tensions in the Middle East and high US bond yields continue to bolster the USD, further pressuring gold.

The focus now shifts to the FOMC meeting minutes due Wednesday, along with speeches from key Fed officials, for clues on future policy. Technically, gold's recent range-bound action suggests a bearish consolidation, with the MACD indicator below zero and the RSI near 38, reinforcing the downside bias. A break below the $4,098 level could signal deeper losses toward $3,936.

On the upside, resistance is seen at $4,226, followed by $4,254 and $4,316. The path of least resistance for gold remains downward, with traders awaiting further cues before placing new bearish bets.