Last Updated on 01/09/2026
Gold Slips as Fed Tightening Expectations Offset Safe-Haven Demand
Gold (XAU/USD) retreated toward $4,445 during Tuesday’s Asian session, losing traction as escalating Middle East tensions fueled inflation worries and strengthened expectations that the Federal Reserve could raise interest rates again.
Geopolitical risks intensified after renewed hostilities between the United States and Iran. President Donald Trump warned of a strong response against Tehran following a series of military exchanges, while Iran’s Revolutionary Guard claimed responsibility for attacks on U.S. military installations in the region. The U.S. military also confirmed strikes on Iranian rocket launch sites on Larak Island near the Strait of Hormuz. The developments have driven oil prices higher, adding to concerns that inflation could remain elevated.
Markets are also reacting to increasingly hawkish signals from Fed Chair Kevin Warsh. Speaking at the Jackson Hole symposium, Warsh reaffirmed the central bank’s commitment to restoring inflation to its target and suggested policymakers are not yet convinced that price pressures are easing sufficiently. Rising energy costs have further reinforced concerns that inflation may remain stubborn.
Rajeev De Mello, Global Macro Portfolio Manager at GAMA Asset Management, noted that investors were caught off guard by the Fed’s more hawkish tone, creating near-term pressure on gold prices.
According to the CME FedWatch Tool, traders now see a 65.4% probability of a rate increase at the Fed’s September meeting, a sharp rise from roughly 39.9% before Warsh’s Jackson Hole remarks.
Gold Faces Pressure as Markets Reprice Fed Outlook
Analysts at TD Securities said gold has eased from recent highs as investors reassess the future path of U.S. monetary policy following Warsh’s comments. The market’s focus has shifted toward the possibility of tighter financial conditions and higher interest rates, which typically weigh on non-yielding assets such as gold.
Hawkish Fed Signals Support the U.S. Dollar
Warsh delivered one of the strongest inflation-focused messages seen in recent months, emphasizing that the Fed still has work to do before inflation is fully under control. He stressed that the central bank’s 2% PCE inflation target remains non-negotiable and indicated that current financial conditions are not restrictive enough to guarantee inflation’s return to target.
The broader policy outlook remains firmly hawkish, with the Fed Sentiment Index holding at elevated levels. This reinforces expectations that the central bank will continue prioritizing price stability, a stance that is likely to support the U.S. Dollar and limit upside potential for gold in the near term.
Technical Analysis: Gold (XAU/USD)
From a technical perspective, gold maintains a moderately bullish outlook on the daily timeframe, with prices continuing to trade above both the 100-day Moving Average (MA) at $4,370.48 and the 20-day Simple Moving Average (SMA) at $4,430.23, which serves as the midpoint of the Bollinger Bands. This positioning suggests that the broader uptrend remains intact despite recent consolidation.
Momentum indicators also support a constructive bias. The Relative Strength Index (RSI) is currently at 54, indicating neutral-to-positive momentum. While buying interest remains present, the reading is well below overbought territory, leaving room for further upside if bullish sentiment strengthens.
On the upside, the next major hurdle is located near the upper Bollinger Band at $4,723.68. A sustained move above current levels could bring this resistance zone into focus, although profit-taking activity may emerge as prices approach the area.
On the downside, initial support is seen around the 20-day SMA near $4,430, followed by stronger support at the 100-day MA around $4,370.48. Should selling pressure intensify, the lower Bollinger Band at $4,136.78 could provide a deeper layer of support and help limit downside losses.
Overall, the technical picture remains favorable for gold as long as prices hold above the key moving averages, though traders will continue to monitor Fed expectations and geopolitical developments for the next directional catalyst.
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