Gold falls to two‑month low near $4,100 on stronger US Dollar

Gold prices plummeted to a two-month low near $4,100 on Thursday, falling during the early Asian session as the US Dollar strengthened and US bond yields increased. Traders now closely monitor Federal Reserve officials' speeches, particularly those of Christopher Waller and Alberto Musalem. The benchmark US Treasury yields climbed again, reaching their highest levels since 2002, while the greenback's strength made USD-denominated gold more expensive for non-US holders.

Rising oil prices also raised inflation concerns and the likelihood of further interest rate hikes. Fed officials were in agreement about raising rates in September, with most anticipating another hike by the end of the year. Analysts expect the Federal Reserve to maintain interest rates at its October meeting but still anticipate a 78.3% chance of a December increase.

Peter Grant, a senior metals strategist at Zaner Metals, stated that higher rates are expected to persist for a longer period, keeping yields and the dollar supported. Despite this, TD Securities predicts a strong downward trend for gold due to the surging real rates and a stronger dollar. However, they believe gold will eventually benefit from persistent demand from ETFs, central banks, and discretionary traders, as well as factors such as geopolitical risk, fiscal concerns, currency devaluation, currency diversification, and stagflation.

Fed Chair Jerome Powell delivered a hawkish tone, emphasizing the need to combat inflation and expressing concerns about artificial intelligence's role in inflation. This sentiment, combined with the Fed's focus on maintaining tight policy, suggests a continued preference for the dollar and a negative outlook for risk-sensitive currencies.

Technical analysis indicates that XAU/USD is facing bearish pressure, trading below key technical levels and signaling further downside potential.