Gold extended its decline during Wednesday’s Asian session, hitting a near three-week low as the US Dollar strengthened further. The non-yielding asset continues to lose ground as traders trim expectations for an aggressive Federal Reserve (Fed) easing cycle.
Fed Rate Bets Shift After Strong PPI
The US Dollar rally has been fueled by last week’s hotter Producer Price Index (PPI), which showed the fastest monthly rise since 2022. This has reduced the odds of a 50 basis-point rate cut in September, with markets now leaning toward a smaller 25-point move.
CME FedWatch Tool data indicates traders expect two modest cuts by year-end rather than aggressive easing. Stronger yields are weighing on gold’s appeal, keeping XAUUSD under pressure.
Powell Faces Political Heat
Former President Donald Trump criticized Fed Chair Jerome Powell again this week, urging immediate cuts to support the housing market. Powell, however, remains cautious, with traders awaiting his Jackson Hole Symposium remarks for fresh policy cues.
Markets expect his speech to clarify whether the Fed will prioritize inflation control or economic support in coming months.
Peace Efforts Hit Safe-Haven Flows
Risk sentiment improved as diplomatic momentum toward ending the Russia-Ukraine conflict picked up. Reports confirmed that a Putin-Zelensky meeting is under consideration following talks hosted by the White House with EU and UK leaders.
Zelensky hailed the development as a major step forward, though Russia launched over 270 drones and 10 missiles on Ukraine this week, underscoring that tensions remain high. Still, investors have shifted away from safe-haven gold in favor of risk assets.
Market Mood Turns Risk-On
With equities finding fresh bids and the USD firming, gold is facing a double blow. The combination of stronger economic data, cautious Fed outlook, and geopolitical optimism has steered capital flows away from bullion.
Gold Technical Picture: Bears in Control
Support: Gold is testing the 100-day SMA near $2,330. A break below could open a slide toward the $2,300 level.
Resistance: Upside barriers stand at $2,360 and $2,375–$2,380.
Indicators: The Relative Strength Index (RSI) is neutral, leaving room for further declines before oversold conditions.
Conclusion
The release of FOMC meeting minutes and Powell’s Jackson Hole speech are now the primary catalysts for gold’s next direction. A hawkish tone may extend losses, while dovish signals could help bullion stabilize.
For now, gold bears remain in control, with downside risks intensifying as safe-haven demand fades and the USD strengthens further.
