Gold Pulls Back From Peak, Holds Above $4,300 Support

Key Moments

Gold Holds Key Levels After Two-Day Pullback

Gold (XAU/USD) is seeing continued selling interest for a second straight session on Friday, extending the retracement from the recent peak near $4,450. The metal is trading modestly higher off intraday lows around the $4,300 area into the European session, but it remains in the red on the day. The current mix of macro and geopolitical factors is sending conflicting signals, making investors wary of committing to a deeper correction from the highest level since June 5, reached just one day earlier.

Softer US Inflation Data Dials Back Fed Hike Expectations

Fresh US inflation readings have shifted market views on the Federal Reserve’s policy path. US Producer Price Index (PPI) data released Thursday showed no change for July, missing expectations for a 0.2% increase. On an annual basis, PPI slowed to 4.7% from 5.5% in June, undershooting the 4.9% consensus forecast. Combined with Wednesday’s US Consumer Price Index (CPI) report, the data points to cooling price pressures.

This easing in inflation is seen as giving the Federal Reserve more flexibility to leave interest rates unchanged. As a result, US Dollar bulls have lost some momentum, which in turn is providing a cushion for non-yielding assets such as gold.

Economists at DBS Group Research noted that the latest US inflation figures had a limited impact on the broader Dollar outlook, stating that “US CPI inflation came in very much in line with market expectations, not strong enough or weak enough to break the DXY Index out of its lower 99.4-100.1 range set after USD/JPY’s sell-off from the joint US-Japan interventions.” DBS also highlighted the shift in rate expectations, saying “the markets reduced the probability of a September Fed hike to 40% overnight from 72% at the end of July, driven by last Friday’s negative nonfarm payrolls and slower CPI inflation readings.”

Fed Officials Offer Diverging Signals on Policy Path

Comments from key Federal Open Market Committee (FOMC) members have added another layer of uncertainty. Chicago Fed President Austan Goolsbee argued that recent price increases are being driven mostly by short-lived factors such as tariffs and energy, and he indicated a preference for patience rather than an immediate, aggressive tightening campaign.

In contrast, Cleveland Fed President Beth Hammack emphasized that the Fed’s progress on inflation remains inadequate, stating that further rate increases may still be required to ensure price stability. These differing messages have prompted market participants to temper expectations for near-term policy tightening.

Even so, Fed funds futures are still pricing in just over a 65% chance of at least one additional rate hike by year-end, down from nearly 85% a week earlier. While this repricing has weighed on the Dollar to some extent, geopolitical developments are helping to underpin safe-haven demand for the currency.

Escalating Geopolitical Tensions Support the US Dollar

Geopolitical risks, particularly in the Middle East, are emerging as a key counterweight to the softer Fed outlook. Treasury Secretary Scott Bessent stated that the United States is planning to apply measures against Iran “that have never been seen.” At the same time, senior IRGC adviser Mohammad Reza Naqdi remarked that Tehran’s strategy is to make any conflict so costly that future US administrations hesitate before undertaking military action against Iran.

These remarks come amid heightened tensions around the Strait of Hormuz. President Donald Trump reiterated that the US has “total control” over the critical shipping lane, while Iran has vowed to keep the strait closed until its demands are met. In parallel, Iran-backed Houthis in Yemen have ramped up attacks on vessels in the Red Sea and Bab el-Mandeb Strait and claimed responsibility for a drone strike on a Saudi Aramco refinery.

This backdrop keeps the war-risk premium elevated and bolsters demand for the US Dollar as a safe-haven asset, which in turn is capping the upside for gold despite its traditional safe-haven status.

Outlook for Gold: Limited Downside but Momentum Fades

The cross-currents from monetary policy expectations and geopolitical risks create a complex setting for XAU/USD. On one hand, signs of peaking inflation and reduced Fed hike odds are generally constructive for gold. On the other hand, the firm bid under the US Dollar stemming from geopolitical uncertainty is restricting gold’s advance.

For now, the metal appears to have paused its monthly rally that began around the $4,000 psychological level. While the latest pullback suggests that the recent upside momentum is fading, the overall downside seems contained in the near term. Market participants are likely to await fresh direction from upcoming US macro indicators, including monthly Retail Sales and the Preliminary University of Michigan Consumer Sentiment Index, scheduled for release later in the North American session.

Technical Picture: Uptrend Intact Above Key Fibonacci and EMA Support

On the 4-hour chart, gold continues to trade above the 200-period Exponential Moving Average (EMA) and a concentrated band of Fibonacci retracement levels. This technical structure indicates that the broader uptrend remains in place despite the ongoing correction.

However, several momentum gauges signal waning bullish strength. The Moving Average Convergence Divergence (MACD) indicator is below both the zero line and its signal line, while the Relative Strength Index (RSI) hovers near 42, pointing to diminishing upside impulses.

Nearby downside levels are defined by Fibonacci retracements of the most recent upswing from the August low:

• Immediate support at the 38.2% retracement, around $4,285
• Next key floor at the 50.0% retracement near $4,234
• Deeper support at the 61.8% retracement near $4,184, with the 200-period EMA providing additional backing just below

On the upside, the first resistance zone is located at the 23.6% retracement level near $4,347. A break above there would put focus back on the recent cycle high around $4,448.40. A sustained move through that barrier could clear the way for further gains.