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Gold prices (XAU/USD) edged higher from a nearly two-week low near $4,050, but remain under pressure from sustained bets on Federal Reserve rate hikes. The U.S. dollar index (DXY) has strengthened amid expectations of tighter monetary policy, which typically weakens gold's appeal as an alternative investment. Analysts note that rising real interest rates reduce gold's non-yielding allure, pushing investors toward higher-yielding assets like the dollar.
For traders, the Fed's policy trajectory remains the dominant factor influencing both gold and the dollar. A potential rate hike in 2024 could further solidify the USD's dominance, capping gold's recovery. Market participants are closely monitoring upcoming Fed statements and economic data for clues about the central bank's next moves. The key technical level to watch is the $4,100 psychological barrier, with a breakdown below $4,000 signaling deeper bearish momentum.
The broader implications for global markets hinge on the balance between inflation control and economic growth. If the Fed delays rate cuts, gold may struggle to regain traction despite its traditional role as an inflation hedge. Investors should also track geopolitical tensions and central bank gold purchases, which could introduce short-term volatility. The coming months will test whether gold can break free from the USD's dominance or remain trapped in a bearish consolidation phase.
