Gold (XAU/USD) came under renewed selling pressure during Friday’s early European session, slipping below the psychologically important $4,600 level as investors reassessed the outlook for US monetary policy.

The retreat follows a pullback from a three-month high, with stronger expectations for Federal Reserve tightening reducing some of the appeal of the non-yielding precious metal. In this article, Praxes Group’s brokers offer a more in-depth look at the topic.

Markets have been closely focused on the latest US inflation figures, which provided an important signal for the Federal Reserve’s policy outlook. The core PCE inflation measure, the Fed’s favored gauge of underlying price pressures, came in at 3.3% annually in July, in line with economists’ forecasts.

Every month, both headline PCE and core PCE increased by 0.2%, reinforcing the perception that underlying price pressures remain sufficiently persistent to complicate the Fed’s path toward monetary easing.

The data prompted a noticeable repricing in interest-rate expectations. The implied probability of a September Fed rate hike increased to approximately 40%, compared with 36% before the inflation figures were released. The shift has provided support to the US dollar and Treasury yields while simultaneously creating a headwind for gold.

Jackson Hole Becomes the Next Major Catalyst

With the PCE data now largely incorporated into market pricing, attention is turning toward the Jackson Hole Economic Symposium, where Fed Chair Kevin Warsh is scheduled to speak on Friday. His comments could provide important clues about the central bank’s tolerance for persistent inflation and the likely trajectory of interest rates.

For gold, the key issue is whether Warsh adopts a more hawkish policy stance. A message emphasizing the need to maintain restrictive monetary conditions, or even prepare markets for additional rate increases, could lift real yields and strengthen the dollar. Both developments tend to weigh on bullion because gold generates no interest income.

Gold’s relationship with inflation expectations is therefore more complicated than a simple inflation hedge narrative suggests. While investors often purchase bullion during periods of rising inflation or economic uncertainty, higher real interest rates increase the opportunity cost of holding gold. 

Consequently, persistent inflation can initially support the metal, but if it causes central banks to maintain or increase interest rates, the resulting yield environment can ultimately become bearish for XAU/USD.

Gold Sentiment Remains Resilient

A more hawkish Fed does not necessarily invalidate gold’s broader bullish structure. TD Securities sees a shift in Warsh’s tone as a near-term risk, with a significantly hawkish message potentially triggering a reversal. 

However, the threshold for materially damaging gold sentiment remains high. Traders will watch Warsh’s views on inflation, labor conditions, rates, and monetary restriction at Jackson Hole.

Technical Outlook: $4,600 Becomes a Key Pivot

From a technical perspective, the XAU/USD daily chart remains bullish despite the latest pullback. Gold continues to trade comfortably above its 100-day simple moving average (SMA) and the 20-day Bollinger middle band, indicating that the underlying trend remains constructive.

Momentum indicators also favor the bulls. The 14-day Relative Strength Index (RSI) is positioned around 65, reflecting solid positive momentum while remaining below the traditional 70 overbought threshold. 

This suggests that buyers retain control, although the increasingly elevated RSI also warns that further gains could become more difficult without a period of consolidation.

On the upside, immediate resistance is located near $4,760, corresponding to the upper Bollinger Band. A sustained break above this area could reopen the path toward fresh highs and reinforce the broader bullish trend.

Conversely, the first area of interest on the downside is around $4,585, close to current price action. A decisive break beneath this level would expose the 20-day Bollinger middle band near $4,415, followed by stronger trend support at the 100-day SMA around $4,375.

A much deeper correction could eventually target the lower Bollinger Band near $4,073.52, but such a scenario currently appears less likely while gold remains above its principal moving-average supports and daily momentum remains positive.

Outlook

Gold’s move below $4,600 represents a meaningful short-term setback, but not yet a decisive technical reversal. The market is caught between hawkish Federal Reserve expectations, which favor higher yields and pressure bullion, and persistent geopolitical and macroeconomic risks, which continue to support safe-haven demand.

The Jackson Hole Symposium is consequently the next major volatility catalyst. A clearly hawkish message from Warsh could strengthen the dollar, push real yields higher and extend gold’s correction. However, if policymakers avoid signaling aggressive tightening, the existing bullish structure could quickly regain traction.

For traders, the most important levels are $4,585 on the downside, followed by $4,415 and $4,375, while $4,760 represents the critical upside barrier. Until these levels are decisively broken, the technical picture favors viewing the current weakness as a pullback within a broader constructive trend, rather than the beginning of a sustained bearish reversal.