Gold Forecast: XAU/USD awaits US CPI inflation for a fresh directional impetus

Gold price is attempting a tepid bounce from near weekly lows of $3,341 early Tuesday, awaiting a fresh directional impetus from the US Consumer Price Index (CPI) data for July.

Gold eyes US CPI inflation for fresh directives

Markets appear cautiously optimistic, bracing for the US CPI showdown while cheering an extension of a tariff truce between the world's two largest economies, the United States (US) and China, until November 10.

Earlier on, China eased some export controls on US firms for 90 days.

The positive risk tone checked the US Dollar (USD) recovery, helping Gold price stage a modest rebound.

With trade tensions ebbing, attention turns to the US inflation data for July, which will have a significant impact on the markets’ pricing of interest rate cuts by the US Federal Reserve (Fed) this year.

The current market pricing suggests at least two rate cuts from the Fed in 2025, while J.P. Morgan expects the Fed to deliver four successive rate cuts starting in September.

Economists expect the annual US CPI to rise 2.8% in July after increasing by 2.7% in June. The core CPI inflation is set to edge higher to 3% over the year in the same period, compared to 2.9% previous.

On a monthly basis, CPI and core CPI are expected to accelerate by 0.2% and 0.3%, respectively.

An unexpected slowdown in US inflation would double down on the dovish Fed bets, smashing the US Dollar and reviving the Gold price uptrend.

In contrast, the US Dollar could resume Monday’s recovery mode if the figures come in hotter-than-expected, implying the tariff impact and that the Fed could stick to its patient stance for longer.

In such a scenario, the non-yielding Gold price could see a fresh downtrend.

Gold price technical analysis: Daily chart

The daily chart shows that Gold price remains exposed to two-way risks in the lead-up to the US CPI data release.

The 14-day Relative Strength Index (RSI) is flirting with the 50 level, suggesting a lack of clear directional bias.

Buyers are battling the critical support-turned-resistance of the 21-day Simple Moving Average (SMA) and the 50-day SMA confluence zone near $3,355 on their tepid recovery from weekly troughs of $3,341.

Hotter-than-expected US CPI prints could reinforce selling interest, sending Gold price toward the 100-day Simple Moving Average (SMA) at $3,296.

If the bearish pressures intensify, Gold price will likely challenge the July 30 low of $3,268, followed by the $3,250 psychological barrier.

On the other hand, Gold price could seek acceptance above the aforesaid confluence hurdle near $3,355 and aim for the rising trendline resistance at $3,403 if the data surprises to the downside.

The next bullish target is aligned at the $3,440 static resistance.