Key Moments
- Gold (XAU/USD) pulled back from an intraday peak near $4,450 and fell below $4,400 as the European session approached.
- Markets continued to price in nearly an 80% probability of a US Federal Reserve rate hike in 2026, supporting the US Dollar.
- Geopolitical tensions involving the US-Iran standoff and Red Sea shipping risks kept oil prices supported and sustained inflation concerns.
Gold Price Slips After Failing to Hold Asian Gains
Gold (XAU/USD) gave back early Asian-session gains after reaching its highest level since June 5, near the $4,450 area earlier on Thursday, and extended its decline below the $4,400 level heading into the European session. The initial boost that followed signs of cooling US inflation faded as market participants stayed focused on the risk that higher energy prices could reignite price pressures. That concern continued to favor expectations of at least one US Federal Reserve interest rate increase in 2026, reducing the appeal of non-interest-bearing gold.
US Inflation Data Offers Only Limited Support
Data from the US Bureau of Labor Statistics on Wednesday showed that headline US Consumer Price Index (CPI) inflation slowed from 3.5% to 3.4% year-on-year in July, in line with market forecasts. The core CPI measure, which excludes food and energy, rose 0.2% on a monthly basis and 2.5% year-on-year, also matching expectations. Combined with last Friday’s weaker US Nonfarm Payrolls (NFP) report, the figures provided the Fed with more flexibility to keep interest rates unchanged in September, offering some support to gold prices initially.
Geopolitics and Oil Market Volatility Sustain Inflation Fears
Despite the softer inflation reading, investors remained concerned about upside risks to prices stemming from volatile crude oil markets, driven by tensions between the US and Iran. President Donald Trump reiterated that the US has “total control” over the Strait of Hormuz, while Iran has vowed to keep the strategic chokepoint closed until its demands are met. At the same time, Iran-backed Houthi forces in Yemen have intensified attacks on vessels in the Red Sea and the Bab el-Mandeb Strait, focusing on Saudi-linked ships.
These developments have pushed up war-risk premiums and continued to support crude oil prices. Persistently firm energy costs have reinforced market expectations for additional Fed tightening. According to the CME Group’s FedWatch Tool, traders are still assigning close to an 80% probability that the Fed will raise borrowing costs in 2026. This backdrop helped the US Dollar extend its rebound from the post-CPI low and added to the intraday downward pressure on gold. However, further decisive selling below $4,400 would be needed to confirm a more durable corrective phase in XAU/USD.
Upcoming US Data and Fed Communication in Focus
Traders are now turning to Thursday’s US economic releases, which include the Producer Price Index (PPI) and the regular Weekly Initial Jobless Claims. These indicators, together with remarks from key Federal Open Market Committee (FOMC) members, are expected to influence US Dollar demand and could be an important catalyst for short-term moves in gold.
In parallel, any additional news on the Middle East situation may keep volatility elevated across global markets and generate further trading opportunities in the precious metals space, particularly for gold.
Technical Setup: Momentum Constructive but Near Overbought
On the technical front, Wednesday’s close above the 100-day Simple Moving Average (SMA) and the subsequent break above the 50% Fibonacci retracement of the April-June downswing continue to favor a bullish bias for XAU/USD. The Moving Average Convergence Divergence (MACD) indicator remains at elevated levels, underscoring positive momentum.
However, the Relative Strength Index (RSI) reading of 67.44 is hovering near overbought territory, suggesting that while upward pressure remains, the move could be getting stretched.
Further strength beyond the recent daily swing high would likely encounter initial resistance around the 200-day SMA at $4,502, followed by the 61.8% Fibonacci retracement at $4,525.18. A break above these levels could open the door toward additional upside targets at $4,683 and $4,885.
On the downside, a move back below the 100-day SMA could expose support at the 38.2% Fibonacci level near $4,302 and then the 23.6% retracement around $4,164.38. Below these, a more significant structural support zone is seen near $3,941.47.
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