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Gold drops to nearly two-week low, below $4,400 on hawkish Fed bets and firm USD

FXStreet · 2026-09-01T03:50:30Z
Gold drops to nearly two-week low, below $4,400 on hawkish Fed bets and firm USD
  • Gold meets with a fresh supply on Tuesday amid rising bets for a Fed rate hike in September.
  • Hawkish Fed expectations, along with escalating US-Iran tensions, benefit the safe-haven USD.
  • Traders look to the US data, scheduled at the start of a new month, including the NFP report.

Gold (XAU/USD) weakens further below the $4,400 mark, hitting a nearly two-week low during the first half of the European session on Tuesday. Traders ramped up bets for a rate hike in September following Federal Reserve (Fed) Chair Kevin Warsh's remarks last Friday. Adding to this, inflation risks stemming from higher energy prices back the case for some policy tightening by the Fed, which, in turn, is seen as a key factor driving flows away from the non-yielding yellow metal.

Warsh delivered a surprisingly hawkish debut speech at the Jackson Hole Symposium and signaled that the central bank may consider raising interest rates if inflation does not slow down significantly. Adding to this, rising energy prices due to escalating US-Iran tensions have revived fears of persistent inflation and increased bets on a potential interest rate hike. According to CME Group's FedWatch Tool, traders are now pricing in over a 65% chance that the Fed will raise borrowing costs at the upcoming policy meeting on September 15-16. This, along with geopolitical uncertainties, helps the safe-haven US Dollar (USD) regain positive traction following Monday's slide and further weighs on the Gold price.

In the latest developments surrounding the Middle East conflict, US forces struck two rocket launchers on Iran’s Larak Island in the Strait of Hormuz on Sunday. This was the first US strike since late July, prompting an Iranian counterattack on American air bases in Jordan. Iran also said on Monday ​it had attacked the United Arab ‌Emirates' Al Minhad Air Base with drones. Meanwhile, US President Donald Trump warned that further military action remained possible and threatened to hit Iran "hard". This keeps the geopolitical risk premium in play, which continues to lend some support to crude oil prices and the safe-haven USD.

Traders, however, might refrain from placing aggressive directional bets and opt to wait for important US macro data, scheduled at the start of a new month. A rather busy week kicks off with the release of the US ISM Manufacturing PMI and JOLTS Job Openings, due later today. The focus, however, will remain on the closely watched US monthly employment details – popularly known as the Nonfarm Payrolls (NFP) report on Friday. In the meantime, the aforementioned fundamental backdrop favors USD bulls and suggests that the path of least resistance for the Gold price is to the downside.

XAU/USD 4-hour chart

Chart Analysis XAU/USD

Technical Analysis

Following last week's breakdown below the 100-period Simple Moving Average (SMA), XAU/USD bears now await acceptance below the 38.2% Fibonacci retracement level of the upswing from the late July low before positioning for further losses. In the meantime, the Moving Average Convergence Divergence (MACD) indicator remains below zero, with its latest negative reading, hinting at persistent downside pressure. The Relative Strength Index (RSI) at 34.80 sits close to oversold territory, suggesting that while sellers are in control, the scope for additional aggressive losses could be increasingly constrained.

On the topside, initial resistance aligns at the 100-period SMA around $4,481, ahead of the 23.6% Fibo. retracement at $4,532, with a retest of the cycle high region near $4,697 likely requiring a sustained break above these barriers. On the downside, first support is seen at the 38.2% retracement around $4,430, followed by the 50.0% level at $4,348 and the 61.8% retracement at $4,266. A deeper slide would expose the 78.6% level at $4,149 before the broader bullish cycle floor near $3,999.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.