Gold Supported by Weak USD as Markets Await Key US CPI Data
Gold attracted fresh buying during the Asian session, snapping a two-day losing streak as the recent pullback in the US Dollar from a three-week high gained momentum amid a strong rally in the Japanese Yen.
However, expectations of a hawkish Federal Reserve, combined with ongoing geopolitical uncertainty, continue to support demand for the safe-haven US Dollar and limit gains in non-yielding gold.
The precious metal remains above the 200-day Exponential Moving Average (EMA) near $4,288 and the broader Fibonacci support zone, keeping the short-term outlook constructive despite fading momentum.
Meanwhile, the Relative Strength Index (RSI) near 52 points to a neutral-to-slightly bullish bias. However, the Moving Average Convergence Divergence (MACD) remains below zero, with a reading of around -24, suggesting that upward momentum has weakened following the latest pullback.
Gold Price Technical Outlook
The mixed technical signals suggest that gold could face initial resistance at the 23.6% Fibonacci retracement of the June-August advance, around $4,523.
A sustained break above this level could expose the recent swing high and the upper Fibonacci reference near $4,697.36. A decisive move above this zone would potentially reopen the path toward further gains.
On the downside, initial support is located at the 38.2% Fibonacci retracement near $4,415, followed by the 50.0% retracement around $4,328 and the 61.8% level near $4,241.94.
The 200-day EMA around $4,288 also provides an important layer of broader trend support just below the current market price.
US Inflation Data in Focus
Traders appear reluctant to take aggressive directional positions ahead of the latest US inflation data due later this week.
The US Producer Price Index (PPI) is scheduled for release on Thursday, followed by the Consumer Price Index (CPI) on Friday. The reports will be closely watched for fresh clues about the Federal Reserve’s monetary policy path amid renewed inflation risks stemming from higher energy prices.
The inflation data could have a significant impact on short-term US Dollar dynamics and, consequently, gold prices.
Meanwhile, traders have increased their bets on a potential Federal Reserve rate hike later this month after the latest US Nonfarm Payrolls (NFP) report showed stronger employment growth in August.
USD Support Seen Ahead of Key CPI Release
OCBC strategists described the latest US payrolls report as “marginally USD-supportive” but not strong enough on its own to generate a sustained dollar rally.
They argued that stronger employment data highlights the resilience of the US economy and keeps the risk of further Federal Reserve tightening alive, which could limit the downside in the US Dollar.
However, with wage pressures remaining contained, OCBC expects markets to require stronger inflation evidence before assigning greater confidence to a September rate hike.
Against this backdrop, attention has shifted to this week’s CPI report. A stronger-than-expected inflation reading could trigger a fresh USD rally, while a softer figure could leave price action more mixed.
Geopolitical Risks Support Safe-Haven Dollar
Meanwhile, escalating tensions between the United States and Iran are keeping geopolitical risk premiums elevated and could limit further weakness in the safe-haven US Dollar.
Iran has threatened to retaliate against any new US attacks on its assets while warning that energy infrastructure across the Gulf remains vulnerable.
Iranian security official Mohsen Rezaei also said Tehran was preparing for a potential full blockade around the Strait of Hormuz in response to economic sanctions, raising concerns over prolonged disruptions to global oil supplies.
Investors remain concerned that elevated energy prices could reignite inflationary pressures and strengthen the case for tighter Federal Reserve policy. This could encourage renewed buying of the US Dollar on dips and create additional headwinds for XAU/USD.
As a result, gold buyers may need to wait for strong follow-through buying before anticipating a meaningful upside move and a sustained recovery from last week’s more-than-one-month low.