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\u2019s three-year high of 4.99%.<\/p>\n\n
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\u2013Gulf 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.<\/p>\n\n
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\u2014such as the massive 525-basis-point tightening cycle seen in 2022 and 2023\u2014have severely weighed on non-yielding assets, suggesting we should prepare for continued headwinds.<\/p>\n\n
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.<\/p>\n\n
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.<\/p>\n\n
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.<\/p>\n\n\n\n