Harmovest Capital | Will Gold Extend Its Decline as Fed Turns Hawkish?

Key Highlights

• Markets are beginning to expect the Federal Reserve to shift back toward a more hawkish stance

• The US Dollar Index remains elevated in a high-range consolidation

• Gold continues to face short-term downside pressure

Market ReviewFed Minutes Release Hawkish Signals

The latest Federal Reserve meeting minutes showed that discussions around potential rate cuts have significantly cooled, while policymakers have started reassessing the possibility of further rate hikes.

The minutes stated:

“If inflation continues to remain above 2%, some additional policy tightening may become appropriate.”

Although the federal funds rate was left unchanged, support within the committee for maintaining a “dovish bias” in its policy language has noticeably weakened, signaling a gradual shift toward a more cautious and hawkish stance.

Markets believe that rising energy prices, ongoing Middle East tensions, and persistent US inflation are among the key reasons behind the Feds reconsideration of future rate hikes.

In addition, the US labor market remains resilient, while continued AI-related investment enthusiasm has further boosted corporate capital expenditure, increasing concerns that demand-side overheating risks have yet to fully subside.

According to interest rate futures data, expectations for another 25-basis-point rate hike this year continue to rise, while the US 10-year Treasury yield remains elevated.

Market Impact Analysis

US Dollar (USD)

Supported by rising Treasury yields and growing hawkish expectations from the Federal Reserve, the US Dollar continues to maintain a relatively strong trend.

Gold

As safe-haven demand gradually weakens and both the US Dollar and Treasury yields continue to strengthen, gold remains under short-term pressure and has entered a technical correction phase.

US Equities (SP500)

Markets are increasingly concerned that higher interest rates may remain in place for longer, potentially pressuring corporate financing conditions and equity valuations, leading to increased short-term volatility in US stocks.

Today's Key Events

• Australia Employment Change Data

• US Purchasing Managers Index (PMI)

Markets are closely watching the US PMI data. If the figures indicate further economic slowdown, it could weaken the US Dollars short-term momentum and provide a rebound opportunity for precious metals.

Instruments to Watch

• US Dollar Index

• Precious Metals (Gold, Silver, Platinum)

• US Equity Indices

Today's Trading OutlookShort-Term Strategy: Watch for Potential Precious Metals Rebound

Although gold's overall trend remains weak, softer-than-expected US PMI data may revive the “economic slowdown” narrative and trigger a technical rebound in precious metals.

Market Sentiment AnalysisFear & Greed Index

The latest Fear & Greed Index rose to 60, indicating a notable recovery in market risk appetite compared to the previous reading of 36, suggesting that safe-haven sentiment has continued to cool.

As markets gradually digest geopolitical risks from the Middle East, capital has started flowing back into risk assets such as equities and cryptocurrencies, while safe-haven demand for the US Dollar has begun to weaken.

Technical Analysis – XAUUSD

Gold recently broke below the key EMA89 and EMA144 support zones, officially entering a weaker technical structure.

The current price action has formed an “N-shaped” bearish pattern, indicating that downward momentum is gradually strengthening. Prices are currently consolidating around the 4557 area. If gold fails to reclaim its moving average resistance levels, upside potential may remain limited, while downside risks could continue in the near term.

Overall Outlook

• Trend: Bearish

• Short-Term Structure: Weak Consolidation

• Key Resistance: EMA89 / EMA144

• Key Support Focus: Price action below the 4557 zone