Fed Hawkish Signals Stack with Rising Energy Inflation Expectations, Gold Falls Six Days in a Row, Beware of Level Breach

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Source: Huìtōng Finance

International gold prices continued their weakness during Asian trading hours, with spot gold around $4,830. It has fallen for six consecutive trading days, marking the longest losing streak since late 2024. The core drivers of current gold trends are shifting from geopolitical safe-haven demand to macro policy and interest rate expectations.

From a policy perspective, the Federal Reserve kept interest rates unchanged at 3.5%-3.75% in its latest meeting, marking the second consecutive pause. While maintaining a neutral stance publicly, Chair Powell explicitly stated that rising energy prices could temporarily boost overall inflation. This statement significantly altered market expectations for future monetary policy, bringing the “prolonged high interest rates” narrative back to the forefront.

Although the dot plot still indicates a possible rate cut within the year, market expectations for future easing have cooled noticeably. Analysts generally believe the Fed is now more focused on inflation risks than on slowing economic growth, implying that policy will remain restrictive. Rising real interest rates are a key factor suppressing gold, as gold itself does not generate interest income and becomes less attractive in a high-rate environment.

Meanwhile, rising energy prices further reinforce inflation persistence. Ongoing escalation in the Middle East, with frequent attacks on critical energy infrastructure, has heightened concerns over disruptions in oil and natural gas supplies. Higher energy prices not only boost inflation expectations but also indirectly support the dollar’s strength, exerting double pressure on dollar-denominated gold.

However, from a safe-haven perspective, gold still receives some support. The conflict in the Middle East continues to escalate, increasing geopolitical risks, which should theoretically drive funds into safe assets. But current market structure shows that safe-haven capital is flowing more into dollar assets rather than gold, limiting gold’s benefit from rising risk sentiment.

In terms of market performance, gold has fallen over 10% from recent highs, entering a technical correction zone. The continuous decline reflects a reassessment of macro conditions, shifting from a “dovish easing expectation” to a “sustained high interest rate” outlook.

Technically, on the daily chart, gold has broken below key moving average supports, with the trend shifting from upward to sideways with weakness. Major support levels are around $4,800; a break below could test $4,700. Resistance is at $4,900–$4,950. Short-term rebound potential is limited, with momentum indicators showing increasing bearish strength. On the 4-hour chart, gold is in a clear downtrend channel, with diminishing rebound strength, short-term moving averages aligned bearish, indicating dominant selling pressure. If prices cannot stabilize around $4,830, the downtrend may continue; otherwise, a technical rebound could occur, with attention to a breakout above $4,900.

Overall, gold is caught between macro pressure and safe-haven demand, but short-term drivers remain interest rate expectations and the dollar’s movement.

Editor’s Summary

The gold market is undergoing a macro-driven adjustment phase. While geopolitical risks provide some support, the sustained high interest rates maintained by the Fed exert significant downward pressure. Future trends will depend on inflation data and policy expectation shifts. If inflation remains high, gold may continue to decline; if economic weakness prompts rate cuts, gold could regain upward momentum.

FAQs

1. Why does gold still fall under safe-haven conditions?

Although gold has safe-haven qualities, its price is heavily influenced by interest rates and the dollar. Currently, the Fed’s high interest rates and emphasis on inflation risks increase real yields, raising the opportunity cost of holding gold. Additionally, safe-haven capital is flowing into dollar assets rather than gold, limiting gold’s gains from geopolitical risks. The decline results from multiple factors rather than a lack of safe-haven demand.

2. How do real interest rates affect gold prices?

Real interest rates are a key factor influencing gold. When real yields rise, investors prefer yield-bearing assets like bonds, reducing demand for gold. Conversely, when real yields fall, gold becomes more attractive. In the current environment of high interest rates, gold faces significant downward pressure.

3. Why is Fed policy so impactful on gold?

Gold is priced in dollars and closely tied to dollar strength and interest rates. Fed policy determines liquidity and rate levels, directly affecting gold’s investment appeal. Tight monetary policy usually strengthens the dollar and raises yields, creating a double drag on gold. Changes in market expectations for Fed policy are often reflected immediately in gold prices.

4. What are the key factors influencing future gold trends?

Future gold movements mainly depend on three factors: 1) inflation trends and energy prices; 2) Fed monetary policy path; 3) global risk sentiment. Persistent high inflation and high interest rates tend to pressure gold downward. Economic slowdown and policy easing could support a rebound. Geopolitical risks may also cause short-term shocks at critical moments.