The metal could stay on the defensive in the months ahead as the Fed alon will continue tightening

The price of gold has been losing ground for the sixth week in a row as hawkish Fed remains in focus. The precious metal failed to hold above the descending 20-DMA at the start of the week to accelerate the decline recently. In the process, the bullion derailed the $1,700 psychological level to notch April 2020 lows around $1,660 ahead of the weekend.

The XAUUSD pair keeps clinging to the lower end of the range, suggesting extra losses could be in store. A failure to attract demand at the current levels would pave the way to fresh long-term lows in the $1,610-1,600 zone in the coming days or weeks.

Markets shift their focus towards the Federal Reserve meeting due next week. The central bank is widely expected to deliver another 0.75% rate hike, but some market participants also predict a 100-basis-point hike, citing the latest inflation report that exceeded expectations.

Adding to more hawkish expectations, fresh economic data out of the United States showed that retail sales edged up 0.3% in August, versus the 0.0% estimated, while initial jobless claims fell to their lowest reading in three months. As the figures point at resilience of the US economy, the Federal Reserve could deliver a hawkish hike on Wednesday, thus further pressuring the yellow metal through a stronger dollar and rising Treasury yields.

Gold prices could stay on the defensive in the months ahead as the Fed along with other central banks will continue tightening. A reversal in the gold market would take place once the US monetary authorities start reversing the rate hikes at some point in the future, probably in Q3 next year.


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