Gold tumbles to near $4,200 as hawkish Fed signals and stronger US Dollar pressure bullion

Gold prices plummeted to nearly $4,200 on Monday as hawkish signals from the US Federal Reserve and a stronger US Dollar put pressure on the precious metal. The fall in gold was triggered by higher-than-expected interest rates and inflation concerns following September's quarter-point rate increase. Fed officials expressed doubts about inflation risks easing, while policymakers emphasized the continued need for restrictive monetary policy.

Senior market analyst Kelvin Wong stated that higher interest rates weaken gold due to its lack of yield, making other interest-bearing assets more appealing. OCBC strategists noted that gold dipped further to below 4,250 before recovering slightly overnight, with renewed Middle East tensions driving oil prices higher and US data and hawkish Fed comments bolstering the case for further rate hikes.

The technical analysis found gold trading below the 100-day simple moving average and the Bollinger middle band, with a bearish near-term outlook and resistance at the 100-day SMA near $4,300. Central banks remain the largest holders of gold, purchasing 1,136 tonnes in 2022, the highest annual increase since records began. Gold's inverse correlation with the US Dollar and risk assets, as well as its status as a safe-haven asset during turbulent times, continues to influence its price.