Gold Price Drop: XAU/USD Falls 1.49% to $4,163

The gold price drop on Monday took XAU/USD down about 1.49% to $4,163, after a high of $4,217. A stronger US Dollar, higher oil prices and bets on Federal Reserve rate hikes weighed on the metal.

Key Takeaways

Dollar firmer: The US Dollar Index (DXY) rose 0.3% to 102.56.
Oil higher: WTI crude rallied more than 2% to $93.69.
Chart pressure: Gold's chart shows lower highs and lower lows.

What Happened

XAU/USD gave up its early gains and reversed from $4,217 to trade at $4,163. Higher oil prices were tied to Houthi attacks on Saudi Arabia and Iranian strikes on ships in Hormuz.

The US 10-year Treasury yield was flat at 5.242%, which kept it elevated. Money markets still price a Fed hike, but not in October. The probability of a 0.25% hike at that meeting stands at 20%, against nearly 90% for December.

On the chart, $4,150 is the first support, a psychological level. Below it sit $4,100, then $4,000 and the July 29 cycle low of $3,996. Resistance starts at $4,200, followed by the 100-day SMA at $4,256 and the 50-day SMA at $4,337. The RSI is rising but remains below the neutral 50 level.

Background

Trump announced a ceasefire on attacks on energy installations between Russia and Ukraine, but exchanges of fire were still reported. News reports said the US accepted some of Iran's seven conditions to end the war. Tehran said Hormuz would not open unless its demands were met.

Gold normally trades as a safe haven. It moves inversely to the US Dollar and US Treasuries and is sensitive to real rates. This week, the Dollar and yields are the dominant forces.

Market Impact

XAU/USD: Gold is exposed to a Dollar that gained 0.3% and to Treasury yields held at 5.242%.
DXY: The index at 102.56 reflects demand for the Dollar as markets price a December Fed hike.
WTI crude: The 2% rally to $93.69 follows the reported attacks on Saudi Arabia and ships in Hormuz.
USD/JPY: The pair traded above 158.00, according to the source's market blurbs.

What to Watch Next

US CPI (Wednesday): The inflation reading feeds directly into the Fed hike odds for October and December.
US PPI (Thursday): Producer prices follow a day after CPI and add to the inflation picture.
Fed speakers: Comments led by Fed Chair Kevin Warsh may shift pricing for the rate path.

Bottom Line

Gold fell as the Dollar, oil and Fed hike pricing all moved against it on Monday. For XAU/USD traders, the $4,150 and $4,200 levels frame the current range. The US inflation data this week sets the backdrop for Fed pricing.

Gold Price Drop: XAU/USD Falls 1.49% on Dollar, Oil