Gold holds near $4,450 as Fed rate-hike expectations keep buyers cautious

Gold steadied around $4,454 on Monday as the Federal Reserve's expected rate hikes kept investors cautious. The metal, which had recently reached a three-month high of $4,697, experienced a decline of 3.20% following remarks by Fed Chair Kevin Warsh at the Jackson Hole Symposium. Warsh expressed openness to further rate hikes unless underlying inflation improved significantly, which intensified expectations of a September rate hike.

This hawkish sentiment caused the US Dollar and short-term US Treasury yields to rise sharply. Analysts noted that Warsh indicated a need for convincing evidence of inflation moving towards the Fed's target; otherwise, further rate hikes would be considered. The CME FedWatch tool estimated a 61% probability of a September rate hike, up from 38% before Warsh's speech.

The US Dollar Index, which measures the Dollar's value against six major currencies, traded around 99.53, easing from its peak of 99.72 on August 14. Gold's potential for gains in August was still expected to be around 10%, driven by the Federal Reserve's plan to double liquidity-support buybacks of longer-dated government bonds.

However, higher oil prices and Middle East tensions continued to pose inflation risks. In the near term, expectations of persistently higher interest rates presented a significant obstacle for Gold's recovery. Support levels were identified at the 100-day SMA at $4,370 and the 50-day SMA at $4,211, with a potential breakdown exposing a horizontal floor close to $4,000.

On the upside, the 200-day SMA at $4,529 served as immediate resistance, followed by the $4,700 horizontal barrier.