Gold Prices Slip Amid Hawkish Fed, Consolidation in Focus

Gold prices slipped by more than 0.6% on Monday to $4,350 after the Federal Reserve's 25 basis point interest rate hike last week. The US Dollar Index rose 0.2% to 100.42 despite a slight easing of US Treasury yields later in the session.

The usual inverse relationship between gold and yields failed to materialize as bullion struggled to gain traction. Oil prices also fell due to expectations of US, Iran diplomatic progress ahead of the UN General Assembly, potentially cooling inflation expectations and giving the Fed more room to hike rates.

Technicals pointed to consolidation with a mild downside bias, as the Relative Strength Index turned bearish and lower highs and lows remained in place. Key support levels sit at $4,322, then the 100-day Simple Moving Average at $4,319 and the 50-day SMA at $4,295, with $4,000 as the next demand zone if those levels fail.

Central banks remain a key driver of gold demand, having added 1,136 tonnes worth about $70 billion in 2022, the highest annual purchase on record. Despite this, short-term traders are advised to position for downside or consolidation due to the hawkish Federal Reserve's impact on near-term gains.