Gold Retreats Ahead of Key Fed Event as Dollar Strengthens

Gold prices retreated modestly on Friday, August 22, 2025, snapping a four-day advance as the U.S. dollar gained traction ahead of a pivotal speech from Federal Reserve Chair Jerome Powell. The market is on edge, with traders repositioning portfolios in response to speculation over potential interest rate adjustments and broader policy direction coming out of the Jackson Hole Economic Symposium.

Spot gold fell 0.3% to $3,329.19 per ounce, while U.S. gold futures for December delivery slipped to $3,338.25. The decline marks a slight correction from 2025 highs above $3,380 reached earlier this week amid geopolitical risk and global fiscal uncertainty.

 U.S. Dollar Flexes Muscle Amid Rate-Cut Doubts

The resurgence in the U.S. dollar is one of the primary catalysts pressuring gold today. The U.S. Dollar Index (DXY) climbed to a two-week high at 98.67, buoyed by hawkish commentary from several Fed officials and stronger-than-expected weekly jobless claims. A stronger dollar reduces the appeal of dollar-denominated assets like gold for foreign investors, acting as a natural drag on bullion prices.

This week’s macro data revealed fewer Americans filed for unemployment benefits, while labor costs remained elevated, signaling lingering wage inflation. These factors have rekindled doubts over how quickly the Fed may move to cut interest rates, cooling expectations that had previously pushed gold toward year-to-date highs.

Although markets are still pricing in a 70–75% probability of a 25-basis-point rate cut in September, according to CME FedWatch, many investors are hedging against a more cautious Powell.

“The market’s caught in a tug-of-war between softening inflation data and sticky wage dynamics,” noted Sarah Mendelson, chief macro strategist at ForexFlash Capital Markets. “If Powell walks back some of the dovish language seen earlier this month, we could see gold test deeper support levels.”

 Eyes on Jackson Hole: Gold Traders Brace for Policy Clarity

All market participants are now zeroed in on Powell’s address at Jackson Hole, a closely watched event often used to signal longer-term shifts in monetary policy. In 2020, Powell introduced the Fed’s flexible inflation targeting regime here; in 2022, he spooked markets with a strong hawkish stance. His tone this year could again tilt global markets.

While inflation has steadily cooled over the past three months, sticky services prices and global supply chain constraints, particularly in energy and food, have kept pressure on central bankers. Gold investors remain divided on whether Powell will strike a dovish tone or highlight persistent inflation risks that could delay the anticipated rate easing.

A dovish speech would likely ignite a fresh rally in gold, while hawkishness could catalyze a broader risk-off move across commodities and equities alike.

 Central Banks Continue to Accumulate Gold

Despite today’s pullback, gold remains underpinned by robust central bank buying, particularly among emerging markets and BRICS+ nations. In the first seven months of 2025, central banks added an estimated 410 tonnes of gold to their reserves, led by China, India, Russia, and Brazil, as part of a global trend toward diversification away from U.S. Treasuries.

This structural demand from monetary authorities provides a longer-term bullish backdrop for gold prices, even amid cyclical corrections.

Additionally, gold ETF flows, while volatile, have turned slightly positive in August. According to preliminary data from Bloomberg and World Gold Council, ETF holdings increased by 12.6 tonnes globally in the past two weeks, reversing part of the liquidation seen in Q2.

 Physical Demand Slows in Asia, But Jewelry Sector Holds Firm

Physical demand in Asia’s two largest gold-consuming nations, India and China, has shown some softness in recent weeks due to high domestic premiums and seasonal lulls. However, the upcoming Indian festival season, including Navratri and Diwali, could see a resurgence in retail buying.

In contrast, the Middle East and Southeast Asia are seeing sustained demand due to currency volatility and ongoing geopolitical concerns. The jewelry sector continues to show resilience, particularly in urban markets.

 Technical Analysis: Is $3,300 the Line in the Sand?

From a technical perspective, gold remains in an overall bullish trend on the daily and weekly charts, but RSI divergence and weakening momentum suggest consolidation or correction could continue in the short term.

• Immediate support sits at $3,300, a psychological and fib retracement level.

• Below that, $3,265 offers the next major support — the 50-day moving average.

• Resistance remains firm at $3,375 and $3,420, levels that bulls must breach to resume the 2025 rally.

The MACD indicator has begun to flatten, signaling a potential pause or pullback phase. However, a decisive close above $3,350 could invalidate the bearish divergence and renew upward momentum.

 Outlook for Gold in Late Q3 2025

Despite today’s minor correction, gold has been among the best-performing major assets in 2025, outpacing global equities, bonds, and even Bitcoin. Year-to-date, the metal is up over 28%, benefiting from:

• Declining confidence in fiat currencies

• Record U.S. fiscal deficits and debt servicing costs

• Renewed geopolitical instability

• The global pivot away from the U.S. dollar in trade settlements

With volatility expected to rise leading into the U.S. election cycle and sustained fiscal concerns across major economies, the long-term fundamentals remain solid for gold.

However, in the short term, traders should prepare for heightened volatility, especially as Powell’s tone could trigger algorithmic reactions and portfolio rebalancing.

 Final Thoughts

The retreat in gold prices today is not necessarily a bearish reversal, but rather a healthy consolidation ahead of a high-impact event. The strength of the U.S. dollar, Fed rate expectations, and upcoming Powell remarks are creating an uncertain landscape for precious metals.

Investors and traders should focus on macro indicators, real yields, and central bank positioning to navigate what may be a highly reactive market over the coming days.