Gold started the week lower as rate-hike expectations for the Federal Reserve meeting beginning Tuesday weighed on XAU/USD. The metal traded near $4,285, down 1.44% on the session after touching an intraday low of $4,278, its weakest level since August 7. US inflation data underpinned the repricing: headline CPI rose 0.4% month on month in August versus 0.1% in July, while core CPI increased 0.3% from 0.2%, the fastest in four months. CME FedWatch showed an 86% implied probability of a quarter-point move, up from about 59.4% a week earlier. The US Dollar strengthened, with DXY at 99.57, up roughly 0.50% and at its highest since September 3, as the 10-year US Treasury yield hovered near 4.95% after last week’s three-year high of 4.99%.
Energy and geopolitics added to the macro backdrop. WTI traded around $99.00, near levels last seen on May 21, and was up over 15% this month, while disruptions around Bab el-Mandeb and the Strait of Hormuz included reports of island seizures, Saudi Arabia shutting its East-West pipeline after a drone attack, and a postponed Iran–Gulf Arab states meeting. Technically, XAU/USD sat between the 50-day SMA at $4,271 and the 100-day SMA at $4,33; RSI was in the mid-40s, ADX in the low-20s, and MACD below zero. Support was cited near $4,272, then $4,150 and $4,000, with resistance at $4,331, the 200-day SMA near $4,538, and $4,700.
Federal Reserve Expectations and Macro Headwinds
We are seeing gold (XAU/USD) come under significant pressure near $4,285 as the market braces for the upcoming Federal Reserve meeting. With the CME FedWatch Tool showing an 86% probability of a rate hike following the recent 0.4% monthly rise in August consumer inflation, the immediate bias for precious metals is firmly to the downside. Historically, aggressive interest rate hikes—such as the massive 525-basis-point tightening cycle seen in 2022 and 2023—have severely weighed on non-yielding assets, suggesting we should prepare for continued headwinds.
We also need to account for rising energy costs, with West Texas Intermediate (WTI) crude surging over 15% this month to $99.00 amid escalating Middle East tensions. This energy shock is keeping US 10-year Treasury yields near a multi-year high of 4.95% and boosting the US Dollar Index (DXY) to 99.57. Because a stronger dollar historically dampens commodity demand, we expect gold derivatives to face intense resistance on any short-term rallies.
Technical Outlook and Trading Strategies
From a technical perspective, we advise derivative traders to watch the 50-day Simple Moving Average (SMA) at $4,271 as a crucial line in the sand. A daily close below this support level could accelerate selling pressure, quickly exposing the $4,150 level and eventually the $4,000 psychological floor. Using strategies like bear put spreads could be an effective way for us to capture this potential downside while keeping our risk strictly defined.
Conversely, if the Fed surprises the market with a pause, we could see a rapid short-squeeze back toward the 100-day SMA at $4,331. A clean break above this resistance would shift control back to buyers, putting the longer-term 200-day SMA at $4,538 back on our radar. Given these highly sensitive conditions, we must maintain strict stop-losses and prepare for heightened volatility in the options market over the coming weeks.
