Gold Falls Below $4,334 as Fed Signals Two More Hikes
Gold trades near $4,317 after breaking key support, driven by expectations of two additional Federal Reserve rate hikes this year.
Key points
- Gold broke below $4,334 support, testing $4,301 as the next downside target.
- Markets price in two more Fed hikes, with a terminal rate of 5.00-5.25%.
- Silver lost $65.64 support, with $64.44 now acting as the key floor.
Gold prices dropped below the critical $4,334 support level on Tuesday. The decline reflects market pricing for two more Federal Reserve rate hikes this year. Traders now expect the terminal rate to reach the 5.00% to 5.25% range. This tightening stance keeps a firm ceiling on non-yielding assets like precious metals.
Fed officials argue that current policy remains too accommodative for inflation. President Musalem stated that further increases are necessary to lower price growth. He noted that smaller, gradual hikes would be less disruptive to the economy. Core inflation is expected to stay above the 2% target for an extended period.
Silver Breaks Below Key Support
Silver followed gold lower, losing the $65.64 support level. The metal now trades near $65.29 on the one-hour chart. Technical indicators show the price is below the 100-day and 200-day moving averages. A bearish trendline has also been broken, signaling continued downward momentum.
The next major support for silver is located at $64.44. This level coincides with a bearish wedge pattern. If sellers maintain control, the price could target the $62.36 area. A recovery above the trendline would be required to shift the outlook to bullish.
Geopolitical Risks Provide Limited Support
Geopolitical tensions offer some safe-haven demand for precious metals. Houthi rebels in Yemen are fighting to capture additional territory. Tensions between the United States and Iran may escalate during the U.N. General Assembly. However, these risks also drive inflation, forcing central banks to tighten policy further.
Treasury yields eased slightly on Tuesday, reducing the opportunity cost of holding gold. With light economic data scheduled for release this week, investors focus on Fed speakers. Any signals about October policy will likely dictate short-term price direction. The neutral to bearish outlook remains intact until new data emerges.
