Gold prices plummeted Monday following hawkish comments from Federal Reserve Governor Christopher Waller that rattled precious metals markets. Waller stated the Fed should consider raising interest rates if this week’s Consumer Price Index data shows inflation acceleration, marking a significant shift in tone as markets had largely priced in a pause or potential cuts. The XAU/USD pair sold off sharply as traders repositioned ahead of the critical CPI release.
The remarks come at a sensitive time for gold, which has been trading near recent highs on expectations of a softer Fed stance. Higher interest rates typically pressure gold prices by increasing the opportunity cost of holding non-yielding assets and strengthening the US dollar. Traders are now scrambling to hedge positions ahead of Wednesday’s inflation data, with options markets pricing in elevated volatility.
FXnCO Insight
Gold longs should consider tightening stops ahead of CPI, as an upside inflation surprise could trigger a sharp extension of Monday’s selloff with further downside to key technical support levels.
Source: FXStreet