Gold Drops 700 Pips Amid Rate Hike Speculations: Can It Rebound?

Gold has experienced significant downward pressure since Tuesday, with a total decline of around 700 pips. The sharpest move occurred when gold broke through the critical support level of $1,680, plunging to approximately $1,660 per ounce within a single four-hour period. This marked one of the largest shifts triggered by unexpected U.S. inflation data.

Before this dramatic drop, gold had already been under pressure, falling from around $1,730 to $1,700 immediately after the inflation report was released. The market’s response was driven by the anticipation that the U.S. Federal Reserve might implement a larger-than-expected interest rate hike in the upcoming meeting. Currently, there’s a 30% chance being priced in for a 100-basis-point rate hike, with notable figures like ex-Treasury Secretary Larry Summers advocating for such a move.

While the possibility of a 75-basis-point hike seems more likely, a 50-basis-point increase is still on the table, which could potentially trigger a rebound in gold prices. Another positive indicator for gold is the RSI on the 4-hour chart, which is nearing the 20 level, signaling that the metal may be oversold and primed for a possible recovery.

As markets await the Fed’s decision, the outlook for gold remains uncertain, with the potential for both further downside and a swift rebound depending on the central bank’s actions.