On Monday, gold entered a correction phase after the opening due to the rebound of the US Dollar Index, as the market began to price in rate hike expectations brought by hawkish remarks from officials. During the US trading session, spot gold fell to $4322.78 per ounce, then consolidated around the $4345.00 per ounce level. It ended its two-day winning streak and closed at $4343.44 per ounce, down 0.8%. Gold faced selling pressure for the second consecutive day on Tuesday. Although it rebounded briefly during the session, the Fed’s hawkish stance capped upside momentum, making it difficult to sustain gains. In European trading hours, spot gold dipped to $4291.56 per ounce, and the short-term trend turned weak within a range. The US Dollar Index extended its rally after the Fed rate hike, climbing to a more than two-month high and weighing on gold’s appeal. At press time, spot gold was trading near $4316.50 per ounce, with short-term momentum hanging in the balance.

Austan Goolsbee, President of the Federal Reserve Bank of Chicago, stated in a speech delivered in London on Monday that peRSIstent supply disruptions, including tariffs and rising oil prices triggered by the US-Iran conflict, have pushed inflation higher. Normally, central banks would wait for these temporary shocks to fade naturally instead of raising interest rates. However, Goolsbee pointed out that in the face of recurring supply shocks, the Fed has no option but to hike rates. Rate hikes aim to curb demand from businesses and consumers to match the shrinking supply, ultimately bringing inflation back to the 2% target. Goolsbee’s remarks stood in sharp contrast to those made by Fed Chair Walsh at the press conference last Wednesday, when the Fed delivered its first rate increase in three years, raising the benchmark interest rate by 25 bASIs points.

After the Fed embarked on policy tightening, the US dollar remained strong, pushing the US Dollar Index back above the 100 level. The strength of the dollar was supported by a sharp rise in US Treasury yields, and markets are now pricing in three more rate hikes by the Fed over the coming year. Since late last month, the 2-year US Treasury yield has risen by roughly 55 bASIs points. Analysts believe remarks from some Fed officials have amplified market concerns over sticky inflation, reinforcing expectations that interest rates will stay higher for longer. Nevertheless, while monetary tightening remains a headwind for gold, sustained central bank purchases should help limit downside risks. Global gold ETFs continue to attract capital inflows, creating a tug-of-war pattern for gold: upside capped by rate hike expectations and downside supported by continuous central bank gold buying.

For the short-term gold outlook, the resistance level for spot gold stands at $4450.00 per ounce, and the support level is seen at $4200.00 per ounce.

Spot Gold Daily Chart

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