Gold at two-week low: Geopolitical risks rise again

Gold traded around 4,460 USD per ounce on Tuesday, remaining near a two-week low. Pressure on the metal has intensified due to rising oil prices and hawkish comments from Fed Chair Kevin Warsh, which have significantly increased expectations of an imminent US rate hike.

Oil rose for a second consecutive session following US strikes on an island in the Strait of Hormuz and retaliatory attacks by Iran on the UAE and Jordan. Rising energy prices are adding to inflation risks and strengthening the case for Fed tightening – an unfavourable backdrop for gold.

Kevin Warsh said the Fed will have more work to do unless stronger evidence shows inflation is returning to its 2% target. Markets now price in more than a 65% chance of a rate hike as early as September, up from about 36% before his comments.

Despite the current correction, August was a strong month for gold, with the metal gaining around 10%. The main support came from the US Treasury’s decision to double long-term bond buybacks, which reignited demand for the debasement trade and heightened concerns about the dollar’s stability.

Technical analysis

On the H4 XAU/USD chart, the market has formed a consolidation range around the 4,433 USD level. An expansion of the range towards 4,500 USD on the upside and 4,377 USD on the downside cannot be ruled out today. Given the break below the upward channel at 4,460 USD, a further decline towards 4,320 USD remains the main scenario. The MACD indicator supports this scenario, with its signal line below the centre line and trending downward, indicating continued short-term downside momentum.

On the H1 chart, the market has completed a downward move to 4,395 USD, followed by a correction to 4,464 USD. A wide consolidation range is forming below 4,500 USD. A downside breakout would open the way for a move towards 4,377 USD, with scope for a further decline to 4,318 USD. The Stochastic oscillator confirms this scenario, with its signal line below 50 and trending downward towards 20, indicating continued short-term downside pressure.

Conclusion

Gold has retreated to a two-week low as hawkish Fed signals and rising geopolitical tensions have strengthened the case for higher US interest rates. Oil prices have risen following renewed military action in the Strait of Hormuz, reinforcing inflation risks and pushing the likelihood of a September rate hike above 65%. While gold posted strong gains in August – up about 10% – supported by US Treasury bond buybacks and concerns over the dollar, the short-term outlook remains bearish. Technically, further downside towards 4,377 USD and potentially 4,318 USD appears likely, with the metal’s direction hinging on US economic data and geopolitical developments.