Gold Price Forecast: XAU/USD appears 'buy-the-dip' trade before the US inflation test
- Gold is moving further away from seven-week highs of $4,372 early Monday, approaching $4,300.
- The US Dollar recovers from the post-US NFP slump amid renewed Hormuz risks.
- Gold remains a ‘buy-the-dip’ trade on the daily chart ahead of the US CPI data
Gold is under renewed selling pressure toward $4,300, kicking off the US inflation week on a negative note and retreating further from seven-week highs of $4,372 set last Friday.
Gold stuck between Mideast risks, easing Fed hike bets
Gold is on a slippery slope early Monday, as traders resort to profit-taking following the previous week’s 7% gain, while repositioning ahead of this week’s critical US Consumer Price Index (CPI) data release.
The bullion rallied hard last week, with the uptrend strengthened following the US Nonfarm Payrolls report, which showed that the US economy unexpectedly lost 23,000 jobs in July, against expectations of an 80,000-job gain.
The Unemployment Rate suddenly dipped to 4.1%, but that was due largely to a further decline in those holding jobs or looking for work.
Following the weak US labor market data, markets trimmed their bets for a Federal Reserve (Fed) interest rate hike in September to 44% from about 55% pre-data, according to the CME Group’s FedWatch Tool.
According to TD Securities, the US curve "bull steepened on the negative headline print despite a drop in the UE rate to 4.1%," as the latest labor market data eased fears of renewed strength. The firm notes that the report "eased concerns over a reaccelerating labor market, leading to markets pricing out hikes, with September's pricing declining by 3bp to 12bp of hikes." Looking ahead, TD Securities adds that "while we continue to expect the Fed to keep rates on hold for 2026 and 2027, September pricing could remain substantial as the Fed will continue to look at data to make a decision in the months ahead."
Gold’s latest pullback is also led by a broad-based US Dollar rebound as investors rush for safety in the buck amid renewed tensions surrounding the reopening of the Strait of Hormuz over the weekend.
Iranian Foreign Minister Seyyed Abbas Araghchi said on Sunday that Tehran was close to reaching an agreement with Oman on a new mechanism for managing maritime traffic through the Strait of Hormuz. However, Araghchi stressed that the vital waterway would not be reopened until Washington meets additional conditions.
That followed US President Donald Trump’s comment that “we are only semi-negotiating with them,” per Axios.
Further, there were reports that Iran launched multiple anti-ship cruise missiles from Sirik in southern Iran, striking an oil tanker off Oman's coast. Meanwhile, Tehran-backed Houthi forces hit a Saudi oil refinery Sunday, just days after Riyadh formed a new defense alliance with Turkey and Pakistan amid the escalating US-Israel conflict with Iran.
Against persisting Middle East tensions and a fresh advance in Oil prices, concerns over inflation continue to haunt markets and provide a floor to the Greenback at the expense of the non-yielding bullion.
Later in the day, the geopolitical risk premium will remain in play amid a quiet US economic docket.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,325.48. The metal holds a constructive near-term bias as it trades above the 21-day and 50-day simple moving averages (SMAs) at roughly $4,096.91 and $4,149.68, while still capped beneath the 100-day SMA at $4,388.87 and the 200-day SMA at $4,496.46. The alignment of shorter SMAs below price and longer SMAs above suggests gold is staging a recovery within a broader consolidation, with the Relative Strength Index (14) hovering in bullish territory near 63.7, hinting at firm but not yet overbought upside momentum.
On the topside, immediate resistance emerges at the 100-day SMA around $4,388.87, with the 200-day SMA near $4,496.46 acting as the next key barrier if buyers extend the advance. On the downside, initial support is seen at the 50-day SMA at $4,149.68, followed by the 21-day SMA near $4,096.91, where a break lower would suggest that the current rebound is losing traction and could invite a deeper correction.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
