Gold Price Plunges Under Pressure from Hawkish Fed Outlook

The gold price has been under pressure due to the US Federal Reserve chair's hawkish outlook. Praveen Singh, Head of Currencies and Commodities at Mirae Asset ShareKhan, stated that gold prices are under pressure due to the Fed's hawkish message.

The Fed Chair Warsh delivered a speech at the Jackson Hole Symposium on August 28, expressing concerns over elevated inflation. Although he did not signal a rate hike, he emphasized the need for the Fed to act if inflation does not come down quickly.

The gold price settled with a steep loss of 3.15% at $4455 on Friday and slumped 3.2% in the week ending August 28. At the time of writing this article, spot gold was trading with a daily loss of ~0.40% at $4436.

The escalating US-Iran tensions leading to a surge in oil prices is adding to downside pressure. Warsh's speech communicated three important messages: the Fed is serious about price stability, impact of rise in long-term bond yields may not be as severe as feared earlier and the Fed is asserting its independence to do the needful despite immense political pressure.

The gold price outlook suggests that it will consolidate in the near term with a possible test of support at $4370. Downside may be cushioned ahead of Friday's nonfarm payroll report release, which could influence the short-term direction of gold prices.