Gold’s September gains were swiftly extinguished after the hotter-than-expected August US inflation data was released earlier this week, forcing markets to ramp up bets for a more aggressive Fed.
Spot gold is currently trading below its 200-week simple moving average (SMA), trading around levels not seen since the onset of the global pandemic.
Spot gold is now testing a crucial support zone around the $1660 mark.
If this support level does not hold, there appears little by way of significant support before the psychologically-important $1600 arrives, after stripping away the wild price swings at the onset of the pandemic.
If the Fed next week signals that it’s keeping the pedal to the metal with its policy tightening, prompting markets to push higher the forecasted peak of 4.5% for this ongoing rate hike cycle, then we should see gold prices being pulled lower.
For the immediate term, it remains to be seen whether spot gold can resurface back above the psychologically-important $1700 mark, or continue crumbling under the weight of more incoming supersized Fed rate hikes.