Gold falls as inflation fears and high Oil prices weigh on the precious metal

RoboForex Analysis Department RoboForex

Gold is trading near 4,322 USD per ounce on Friday after falling by almost 2% in the previous session. Investors are now awaiting US consumer inflation data, which could further strengthen expectations of a Federal Reserve rate hike as early as next week.

US producer price data released on Thursday showed that inflationary pressures intensified in August. Producer prices accelerated as the conflict with Iran pushed wholesale energy costs higher.

Following the release, markets raised the implied probability of a 25-basis-point Fed rate hike to around 71%, from approximately 61% shortly beforehand.

Rising oil prices are adding to the pressure on gold. The escalation of the conflict between the US and Iran has driven energy prices higher, increasing inflation risks and strengthening the case for tighter US monetary policy.

US Treasury yields also rose after purchases by the US Treasury under its first expanded buyback operation fell short of market expectations. Higher bond yields are generally negative for gold because the precious metal does not generate interest income and therefore becomes less attractive relative to yield-bearing assets.

Gold has lost more than 2% this week and is on track for a third consecutive weekly decline.

XAU/USD technical analysis

On the H4 XAU/USD chart, the market formed a consolidation range around 4,366 before moving lower towards 4,300.

Today, an upward correction towards 4,366 cannot be ruled out. Once this move is complete, the main scenario envisages another decline towards 4,220.

The MACD indicator supports continued bearish momentum. Its signal line remains below zero and points firmly downwards.

On the H1 XAU/USD chart, the market moved lower towards 4,300 before rebounding to 4,335. A consolidation range has now largely formed above 4,300.

An upside breakout from this range could open the way for a corrective move towards 4,366.

XAU/USD outlook

Gold remains under pressure from rising inflation expectations, elevated oil prices, higher US Treasury yields and growing expectations of tighter Federal Reserve policy.

From a technical perspective, XAU/USD could first stage a corrective rebound towards 4,366. However, the broader scenario remains bearish, with the completion of this correction potentially followed by another decline towards 4,220.

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RoboForex Analysis Department

RoboForex

RoboForex Analysis Department provides timely market insights, expert technical analysis, and actionable forecasts across forex, commodities, indices, and equities.

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