Gold Price Lingers Near Monthly Lows Amid Robust US Dollar Strength: What’s Next?

For the second consecutive day, GOLD prices face selling pressure, hovering around the month’s lowest levels. During Asian trading hours, the XAU/USD hovers approximately at the $1,910 mark, indicating a potential continuation of its decline from its one-month high of $1,953 set on September 1.

A resurgence in the US Dollar’s buying interest, influenced by fluctuating prices from the previous Tuesday, has dampened the appeal of gold. The consensus is that the Federal Reserve will maintain its hawkish stance, bolstering US Treasury bond yields and further strengthening the Dollar. The market largely anticipates the Federal Reserve to maintain higher interest rates for an extended period, factoring in the potential for an additional 25-basis-point hike by year’s end.

Last week’s optimistic US macroeconomic data, indicating a robust economy, reinforced these expectations. The slower-than-anticipated decrease in inflation rates aligns with prospects of further monetary tightening by the Federal Reserve. Thus, all eyes are on the upcoming US consumer inflation data, set for release in the early North American session. The pivotal US Consumer Price Index (CPI) will shape speculations surrounding the Federal Reserve’s rate-hike trajectory, thereby influencing the non-yielding gold’s direction.

Should inflation indicators remain high, it may trigger a resurgence in the USD’s momentum, pushing it to a half-year pinnacle and further dampening gold’s appeal. However, prevailing uncertainties, primarily stemming from China’s economic challenges and global concerns about soaring borrowing costs, could potentially curb aggressive bearish stances on the XAU/USD.

Still, given the current fundamentals, the market sentiment leans decidedly bearish for gold. This viewpoint is further supported by the recent breach below the crucial 200-day Simple Moving Average (SMA) for the XAU/USD. Consequently, even if the upcoming US data stirs a bullish sentiment, it may be short-lived, presenting more of a sell opportunity for investors.