Gold prices declined during the day, with XAU/USD trading at $4,518, down 0.50%, as the US Dollar strengthened following hawkish comments from Federal Reserve officials and rising expectations of a potential rate hike by the end of the year [1]. The US Dollar Index (DXY) rose 0.07% to 99.26, reflecting renewed demand for the Greenback and putting pressure on bullion [1].
Fed Governor Christopher Waller stated he does not anticipate supporting a policy rate change at this time but prefers to remove the easing bias from the Fed's statement. Waller emphasized that if inflation expectations move away from the target, he "would not hesitate" to support a rate increase, labeling current rate cut discussions as "crazy" [1]. Newly sworn-in Fed Chair Kevin Warsh committed to leading a "reform-oriented" central bank and highlighted his intent to learn from past mistakes and successes. During Warsh's swearing-in, US President Donald Trump refrained from calling for rate cuts, instead stressing the importance of central bank independence [1].
Money markets responded to these developments, with the odds of a US rate hike by December 2026 rising, according to Prime Terminal data [1]. Meanwhile, US consumer sentiment deteriorated sharply, as the University of Michigan index fell to a record low of 44.8, down from the preliminary May reading of 48.2 and below economists' expectations. The survey also indicated that inflation expectations increased from 4.7% to 4.8% for the next twelve months and from 3.5% to 3.9% over the next five years, with growing concerns about the cost of living [1].
Looking ahead, the US economic calendar will feature speeches by Fed officials, housing data, first-quarter 2026 GDP figures, and the Core Personal Consumption Expenditures (PCE) Price Index, which is the Fed's preferred inflation gauge [1]. Technical analysis suggests gold may consolidate further, with buyers watching for a breakout above the May 19 daily high of $4,589 to extend gains toward the $4,600 level, though momentum remains bearish [1].
CONCLUSION
Gold prices fell as the US Dollar strengthened on hawkish signals from Fed officials and rising rate hike expectations. Weak consumer sentiment and higher inflation expectations added to market uncertainty. Investors are now focused on upcoming US economic data and Fed communications for further direction.