Gold Price Forecast: XAU/USD extends reversal below $4.400 amid Fed hawkish repricing

Gold (XAU/USD) resumed its decline on Tuesday, following a flat performance on Monday, reaching fresh two-week lows at $4,375 so far, posting a nearly 7% decline from last week’s peak, near $4,700. Precious metals are struggling this week as hawkish comments by Federal Reserve (Fed) Chairman Kevin Warsh at the Jackson Hole summit on Friday provided a fresh boost to the USD.

Strategists at Brown Brothers Harriman note that the US Dollar has “recovered most of yesterday’s pullback” as policy expectations remain firmly skewed toward further tightening. They also highlight that “Fed funds futures price in 67% odds of a 25bps hike on September 16 and imply 60bps of tightening over the next twelve months,” with market “pricing [set to] remain elevated into the September meeting.”

In their view, however, “August CPI on September 11” will be the “decisive test” to see whether those rate expectations – and the Dollar’s recovery – can be sustained.

Technical Analysis: Next downside target is at $4,315

XAU/USD trades at $4,378, with momentum indicators in the daily chart entering bearish territory. The Relative Strength Index (RSI) is testing levels below the key 50 line, and the Moving Average Convergence Divergence (MACD) has slipped below zero, pointing to increasing downside pressure.

Immediate support is seen at the mid-August lows between $ 4,310 and $4,330. Further down, the August 6 low, near $4,225, would come into view. On the topside, previous support at the $4,450 area has now turned resistance and is likely to test rallies, ahead of the 200-day simple moving average (SMA) at $4,530 and last week's highs, near $4,700.