Gold Falls Deeper Below 1,700 USD Amid Strong Dollar

Hawkish Fed undermines gold

The US dollar has reached a one-and-a-half-week high due to expectations that the Fed would stay to its aggressive policy tightening course, which is perceived as hurting the value of dollar-denominated gold.

The strong US monthly jobs report, announced on Friday, demonstrated the economy’s resiliency and gave the US central bank room to raise rates more quickly to confront persistently rising inflation.

In fact, the markets are now pricing in a higher likelihood that the next FOMC policy meeting in November would result in the fourth straight supersized 75 bps rate rise. This continues to sustain the high US Treasury bond rates and discourages investment in the non-yielding yellow metal.

Back in the bearish trend

Today’s decline has brought the bullion back below the long-term downtrend line, implying further weakness in the days ahead. The resistance now stands in the 1,680 – 1,700 USD area, and as long as gold trades below it, the immediate outlook seems bearish.

On the downside, the short-term support could be found near 1,660 USD (previous lows), and if not held, we might see another leg lower, targeting the current cycle lows above 1,600 USD.