Gold slides as Warsh hawkish tilt lifts US Dollar and US yields

Gold prices declined by over 0.42% on Friday as Federal Reserve Chair Kevin Warsh expressed a more hawkish outlook, leading to increased demand for the US Dollar and US Treasury yields. As XAU/USD traded at $4,576, it fell below $4,600 and hit a weekly low of $4,530. At the Jackson Hole event, Warsh reiterated that tackling inflation remains a priority, signaling a more aggressive stance.

Investors adjusted their expectations for a potential 25-basis-point rate hike by the Fed at the September 16 meeting, with odds dropping slightly to nearly 44% for December. The US Dollar Index (DXY) rose by over 0.38% and is currently at 99.49, driven by higher US Treasury yields. Gold's price action showed its tendency to test the 200-day Simple Moving Average (SMA) at $4,527, though it retreated from the psychological $4,550 level.

The RSI remains above its 50-level, indicating that buyers are still in control, but the momentum is weakening. If XAU/USD breaks below its 200-day SMA, it could potentially move toward $4,500. Key support levels for buyers are identified at $4,600 and $4,643, with the latter being the August 27 daily high. Gold has historically served as a store of value and hedge against inflation and currency depreciation.

Central banks, particularly those in emerging economies like China, India, and Turkey, have been increasing their Gold reserves, recognizing its importance as a safe-haven asset. The US Dollar's strength tends to weigh down Gold prices, while a weaker Dollar can drive up Gold prices.