Selling gold on Fed’s hawkish stance

Gold has been highly volatile over the past couple of weeks. Prices initially plunged to the psychologically important level of $4,000 per troy ounce, but later managed to recoup some losses. The precious metal is now hovering around $4,200. A recent rally was driven by progress in the Middle East crisis. However, bullion’s upside is capped by the Federal Reserve’s (Fed) aggressive tone.

In other words, the US central bank’s policy acts as a key headwind for gold. The outcome of its latest meeting compelled market participants to price in the very real possibility of higher interest rates by year-end. The regulator’s logic is straightforward: inflation risks keep mounting. Under these circumstances, monetary easing does not look like an option. This is bad news for a non-income-generating metal. Meanwhile, rising American Treasury yields boost demand for dollar-denominated assets. A stronger greenback also creates an unfavorable environment for bullion, making it more expensive for holders of other currencies.

But let’s turn to the brighter side. The precious metal still benefits from its safe-haven status. In addition, a looming US-Iran peace agreement could provide support. During this prolonged conflict, gold was weighed down by a strengthening dollar, climbing government bond yields, and persistent concerns that any escalation might trigger inflation spikes and a surge in crude quotes. Such a landscape convinced the market that the Fed had little choice but to be hawkish, putting pressure on XAUUSD. However, if the conflicting sides move closer to signing a peace deal, the geopolitical risk to oil prices could recede, along with inflation expectations, giving the US central bank room to adopt a more dovish stance. The greenback might lose its ground, and Treasury yields would go down, creating favorable conditions for gold. Investors may then view the metal as a means of protecting capital amid a gradual shift toward softer policy.

In summary, the fundamental background remains multi-directional, but the technical picture suggests a high probability of a downward move, with the next target at $4,000 per troy ounce.

The ultimate recommendation is to sell gold at the current price, aiming for $4,020 within one month. To mitigate the risk of adverse market movements, place a Stop Loss order just above resistance, at $4,320.