Gold prices (XAU/USD) increased by 1.15% to near $4,320 during the European trading session on Thursday, driven by a cooling in the recent oil price rally. This moderation in oil prices followed reports that Saudi Arabia is offering additional crude cargoes to Asian refiners through ship-to-ship transfers off Oman's Sohar port, as per a Times of India report. The negative correlation between gold and oil prices is highlighted, with higher energy prices typically raising inflation expectations and prompting fears of interest rate hikes by global central banks [1].
Despite the recent gains, the upside for gold appears limited due to expectations of further interest rate hikes by the Federal Reserve. On Wednesday, the Fed raised interest rates by 25 basis points to a range of 3.75%-4.00%, in line with market expectations. The Fed's dot plot indicated that 16 out of 18 policymakers foresee at least one more rate hike this year. Notably, Fed Chair Kevin Warsh did not participate in the dot plot projections [1].
Strategists at Deutsche Bank noted that the Fed's latest move has led to a significant shift in the front end of the US yield curve. Money markets have now fully priced in an additional 75 basis points of Fed hikes by next June, with a hike around 50% priced for the upcoming October meeting (+10.8bps on the day) [1].
From a technical perspective, XAU/USD is trading at $4,314.02, maintaining a bearish near-term bias as it remains below the 20-day exponential moving average (EMA) at $4,364.99. The Relative Strength Index (RSI) stands at 46.39, just below neutral, suggesting waning upside momentum. Immediate resistance is at the 20-day EMA near $4,365, with further resistance at the September 8 high near $4,443. On the downside, a drop below Wednesday's low at $4,235.40 could see gold fall to the psychological level of $4,000 [1].
CONCLUSION
Gold's recent gains are attributed to easing oil prices, but the upside is constrained by expectations of further Federal Reserve tightening. Market participants have fully priced in additional rate hikes, and technical indicators suggest limited bullish momentum for gold in the near term.