Gold Price Forecast: XAU/USD buyers retain control as the US CPI week begins
- Gold is extending the previous week’s advance into early Monday, recapturing $4,200.
- US Dollar bounces amid Middle East tensions, shrugging off softer Treasury yields and falling Oil prices.
- Technically, the daily bearish RSI continues to caution Gold buyers aiming for the 100-day SMA at $4,256.
Gold is extending its recovery from a two-month low of $4,067 into a new week on Monday, trying to remain above the $4,200 level amid a pause in the US Dollar (USD) retreat from an 18-month peak.
Will Gold defend $4,200?
The USD stages a tepid bounce, threatening Gold’s advance above $4,200, as traders continue to weigh the weekend’s escalation in the Middle East conflict.
Saudi Arabia’s King Khalid International Airport came under attack again a day after 12 were killed in alleged Houthi strikes. Houthis also claimed an attack on Saudi's Dammam airport and Aramco sites in the eastern part of the kingdom, Reuters reported. Saudi Arabia has not yet confirmed this report.
US President Donald Trump said that he is considering joining Saudi Arabia in its retaliation against Tehran-backed Yemeni Houthis.
Separately, Secretary of Iran’s Supreme National Security Council, Mohsen Rezaei, said Washington has accepted some of Tehran’s conditions for an agreement, but its response remains “inadequate”.
However, Oil prices pay little heed to the Middle East developments, incurring steep losses on hopes of a Ukraine-Russia ceasefire and receding supply risks.
Trump claimed Russia and Ukraine have agreed to an “energy ceasefire”; however, Ukraine’s President Volodymyr Zelenskyy said that he was not aware of an “energy ceasefire”.
This followed Friday’s announcement that the US lifted sanctions on the sale of Russian diesel in global markets until April next year.
The recent retreat in Oil prices has somewhat eased inflation worries, providing some respite to global bond markets. Softer US Treasury bond yields and falling oil prices counter the renewed USD uptick, keeping the non-yielding bullion supported.
But the bright metal remains poised for wild swings amid thin liquidity as US bond markets and Japanese markets remain closed on Monday.
Also, buyers could turn cautious, with the focus shifting to Wednesday’s US Consumer Price Index (CPI) data, especially after the Nonfarm Payrolls (NFP) disappointment and a dip in US Consumer Sentiment.
The inflation report is one of the last major economic releases before the US Federal Reserve's (Fed) monetary policy meeting due later this month. Traders are pricing in an 83% chance of the Fed on hold this month, up from 51% a month earlier, CME FedWatch tool showed.
US core inflation seen moderating but upside risks linger
According to TD Securities, September core CPI is expected to "moderate to 0.20% m/m," with the slowdown "led by supercore at 0.24% after August inflation was pushed up by the segment." The bank anticipates that "core goods will likely pick up slightly due to vehicle prices," while "shelter inflation should rebound slightly higher after a weak August." On this basis, TD Securities notes that its forecast "would result in y/y core CPI going sideways at 2.4%," but it also highlights "risks to the upside, with the potential for more strength from discretionary services or AI-related goods."
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,205.00, keeping a bearish near-term bias as spot holds below a stack of key moving averages. Price remains under the 100-day simple moving average (SMA) near $4,256 and the 50-day SMA around $4,338, while the longer-term 200-day SMA up at roughly $4,529 reinforces a capped broader tone. The Relative Strength Index (14) around 47 sits just below the neutral midline, hinting at subdued upside momentum after the recent slide.
On the topside, initial resistance is aligned at the 100-day SMA near $4,256, with the 50-day SMA at about $4,338 acting as the next hurdle before the more distant 200-day SMA around $4,529 comes into play. On the downside, the key structural reference is the prior rising trend-line support around $4,002, which now stands as the main medium-term floor; a decisive break beneath that area would likely open the door to a deeper corrective phase.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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.
