Gold Prices Slip Further Amid a Resilient USD and Hawkish Federal Reserve Outlook

 GOLD prices extend their downward trajectory observed over recent days, slipping further beneath the $1,915 benchmark and marking a new low for the week. Bolstered by its strongest position since December 2022, the US Dollar (USD) continues to exert pressure on the XAU/USD.

However, the prevailing risk-averse sentiment, underscored by global equity market fluctuations, offers some buoyancy to gold as a safe-haven asset. A growing consensus around the Federal Reserve’s intention to sustain higher rates amplifies concerns about economic challenges brought about by soaring borrowing expenses.

Coupled with ongoing apprehensions regarding a potential housing market crisis in China, this has curbed investor enthusiasm for high-risk assets, providing some respite for the XAU/USD. Still, meaningful recuperation for gold remains uncertain, especially given the broader sentiment supporting the Fed’s inclination towards prolonged elevated interest rates.

Recent robust US economic indicators, paired with assertive remarks from key Fed figures, hint at the US central bank’s unwavering commitment to monetary policy tightening. Specifically, Minneapolis Fed President Neel Kashkari posited that US interest rates might need to rise marginally and be maintained at that level to stabilize the economy. This sentiment has spurred a continued decline in the US fixed-income market, propelling the yield of the two-year US government bond to its highest in 17 years. Furthermore, the pivotal 10-year US Treasury note surpassed the 4.50% mark, a feat not seen since 2006, bolstering the USD and reinforcing the bearish outlook for gold.

Monday witnessed gold prices rebuffed around the critical 200-day Simple Moving Average (SMA), and the ensuing downward momentum leans in favour of bearish market participants. Daily chart indicators are now shifting towards a negative trajectory, implying that the most probable direction for the XAU/USD remains bearish. This suggests a potential move towards revisiting the monthly low near the $1,900 milestone. Any subsequent decline might act as a catalyst for bearish traders, setting the stage for further short-term devaluation.