Gold (XAU/USD) extended its losses for the second consecutive day on Friday as a strengthening US Dollar (USD) continues to weigh on the non-yielding precious metal. The market’s cautious sentiment and reduced bets for a Federal Reserve (Fed) rate cut have contributed to the ongoing downward pressure on Gold.
Traders remain on edge, awaiting Fed Chair Jerome Powell’s address at the Jackson Hole Symposium for clear monetary policy cues that could determine the near-term trajectory of the yellow metal. The article from ProDivia Group broker Jordan Girbon delivers a clear and thorough breakdown.
During the Asian session, Gold hovered just above the overnight swing low, reflecting the market’s hesitation and the continued USD uptrend. The US Dollar surged to its highest level since August 5, underpinned by a diminishing probability of aggressive policy easing by the Fed.
As a result, investors are shifting flows away from Gold, which traditionally serves as a safe-haven asset, especially when the USD weakens. However, in the current environment, Gold’s non-yielding nature has made it less attractive compared to the yield-bearing US Dollar.
Market Sentiment and Fed Rate-Cut Expectations
Traders’ reduced expectations for Fed rate cuts come after recent inflation data, particularly the US Producer Price Index (PPI), indicated signs of accelerating price pressures. Market participants have reassessed the likelihood of a more aggressive monetary easing, which has strengthened the USD and weakened Gold demand.
Prominent Fed officials have echoed this cautious stance. Kansas City Fed President Jeffrey Schmid described the central bank’s policy as “modestly restrictive”, signaling reluctance for a September rate cut.
Similarly, Cleveland Fed President Beth Hammack emphasized the importance of maintaining restrictive measures to bring inflation under control, highlighting that high inflation trends remain a major concern.
Meanwhile, Chicago Fed President Austan Goolsbee suggested that recent inflation data could delay rate cuts, though he left the September policy meeting open for possible action. Boston Fed President Susan Collins, however, signaled some openness to easing next month due to potential weaker employment figures and rising tariff pressures.
Data from the CME Group’s FedWatch Tool shows traders pricing in a 75% chance of a Fed rate cut in September, with expectations for at least two 25 basis points reductions by year-end. These forecasts are supported by rising Jobless Claims, which reached a three-month high, and an increase in unemployment benefits claims, which climbed to the highest level in nearly four years.
Gold Technical Outlook: Immediate Supports and Resistances
From a technical perspective, Gold’s immediate downside is guarded by the overnight swing low around $3,325. Breaching this level could open the door for a retest of the 100-day SMA, currently near the $3,316-$3,315 zone.
Should the $3,311 mark, corresponding to a three-week low, be broken, XAU/USD bears may gain momentum, potentially dragging Gold below $3,300 towards the $3,270-$3,265 strong horizontal support.
This area represents the lower boundary of a three-month-old trading range, and a sustained breakdown could signal that Gold has topped out, paving the way for further depreciation.
On the upside, resistance levels have emerged in the $3,348-$3,350 region, where short-covering rallies could gain traction. A sustained move above this barrier could lift Gold to the $3,375 resistance zone, with momentum potentially extending towards $3,400.
The next major supply level lies in the $3,434-$3,435 zone, marking the top of a three-month-old trading range and representing a key hurdle for any bullish recovery.
Key Drivers: USD Strength and Fed Policy
The continued USD strength remains the primary driver of Gold’s recent underperformance. With the Fed signaling a modestly restrictive policy stance, traders are cautious about short-term rallies in XAU/USD.
The non-yielding nature of Gold makes it particularly sensitive to USD fluctuations, especially when interest rate expectations remain unsettled.
Investors are now closely watching Powell’s speech at Jackson Hole, seeking guidance on the rate-cut trajectory. Any hawkish remarks could reinforce USD bullishness, further suppressing Gold, while dovish hints could trigger a relief rally in the precious metal.
Until then, Gold’s path of least resistance appears to be downwards, with the $3,325-$3,316 region acting as a critical technical support zone.
Conclusion
Gold continues to face headwinds from USD strength and reduced Fed rate cut expectations. The market’s cautious tone provides little support for the non-yielding yellow metal, and technical levels suggest a potential move below $3,300 if the overnight swing low fails to hold.
Traders are now focused on Powell’s remarks, which could provide the next meaningful impetus for Gold. Until then, XAU/USD remains under pressure, navigating a tight trading range amid ongoing macro uncertainties and inflation dynamics.
