Gold prices stabilized after experiencing a sharp decline. This stabilization is attributed to a strengthening U.S. dollar and rising Treasury yields, both of which followed remarks made by Federal Reserve Chair Kevin Warsh. Chair Warsh emphasized the Fed's dedication to maintaining price stability and warned that persistent inflation continues to pose a significant risk.
Warsh's comments led to an increased expectation for a Fed rate hike in September, surging from 35.9% to 57.5%. In response, the 2-year U.S. Treasury yield climbed by 11.8 basis points to 4.348%, and the U.S. dollar index rose by 0.5% during the trading session. Gold briefly dipped below $4,600 per ounce due to the intensified expectations of an imminent rate hike.
Jeffrey Roach, Chief Economist at LPL Financial, noted that Warsh's remarks reinforced expectations of a sustained tight monetary policy. He suggested that monetary policy is entering a new phase, with the Fed focusing more on real-time data and reevaluating economic principles as artificial intelligence transforms production capabilities. Roach characterized Warsh's speech as "hawkish" and supportive of the U.S. dollar, indicating the Fed's preparedness to maintain higher policy rates for an extended period.
Internationally, as of August 30, global gold prices on Kitco were listed at $4,454 per ounce, showing a $1 increase from the previous morning. Fawad Razaqzada, Market Analyst at Forex, suggested that unless long-term U.S. Treasury yields significantly decline, gold corrections could present buying opportunities. However, an August surge of 15% has led to overbought conditions, potentially triggering profit-taking. Gold is currently trading around $4,600 per ounce and approaching the $4,655–$4,700 resistance zone, which previously saw strong selling pressure in May.
Technically, the uptrend for gold remains intact, with prices above the 50-day and 200-day moving averages. A decisive break above $4,655–$4,700 could extend gains, while failure to overcome this resistance could find support at $4,515 per ounce, and further down at $4,400 per ounce. Razaqzada noted that sellers require a clear reversal signal to shift the current trend, and gold's hold above $4,000 per ounce, a key long-term support, indicates the uptrend is still valid.
