Gold Price Forecast: XAU/USD looks to US CPI and Warsh’s testimony for the next big move
- Gold sees a dead cat bounce from two-week lows early Tuesday, regains $4,000, despite US-Iran risks.
- The US Dollar eases on profit-taking ahead of US CPI inflation and Fed Chair Warsh’s congressional hearings.
- Daily technical setup keeps suggesting that Gold remains a ‘sell-on-rise’ trade.
Gold is recovering a part of the previous 3% slide to two-week lows near $3,985, back above the $4,000 level in Asia on Tuesday. Gold traders brace for intense volatility on the US Consumer Price Index (CPI) data release, followed by Federal Reserve (Fed) Chair Kevin Warsh’s testimony.
Gold is primed for two-way risks
Following a sharp sell-off on Monday, courtesy of renewed military attacks between the United States (US) and Iran over controlling the Strait of Hormuz, Gold sellers seem to take a breather, allowing buyers to try their luck in the lead-up to the upcoming big event risks.
A brief retracement in the US Dollar (USD) from two-week highs across the board, amid profit-taking, aids the Gold price rebound.
Traders resort to position readjustments before the US inflation showdown and Warsh’s hearings before the House Financial Services Committee on Tuesday.
The bullion also seems to attract some dip-buying, following reports that the European Union (EU) announced new sanctions against Sudan by targeting the country's gold trade on Monday, as the civil war rages on.
However, any recovery attempt in Gold will likely remain capped by persisting tensions in the Middle East and surging Oil prices, which reignite inflation concerns and double down on expectations around a September Fed rate hike.
In the latest Mideast update, the US Central Command (CENTCOM) announced that the “US forces completed new strikes on Iranian military targets,” adding that they struck military targets across Iran, including Bushehr, Chah Bahar, Jask, Konarak, Abu Musa, and Bandar Abbas.
Earlier on, the United Arab Emirates (UAE) Ministry of Defence said that two UAE national tankers, the Mombasa and Al Bahiyah, were targeted by two Iranian cruise missiles in the southern lane of the Strait of Hormuz, in Omani territorial waters, per Reuters.
The Iranian Islamic Revolutionary Guards Corps (IRGC) soon confirmed that two 'offending super tankers' were hit and disabled in the Strait of Hormuz, warning that “cooperation with the 'aggressor enemy' in the critical waterway will delay reopening of the waterway and create a global energy crisis.”
Markets are assessing the latest escalation of attacks from both sides, with risk-aversion a key theme so far this Tuesday.
Looking ahead, the next directional impetus in Gold hinges on the US CPI release and Warsh’s testimony, with a hot underlying inflation print, combined with hawkish words by the new Fed Chair, likely to exacerbate Gold’s pain.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,014.46, extending a bearish near-term bias as spot holds below the 21-day simple moving average (SMA) at $4,111.01 and deeper under the 50-day SMA at $4,331.69. The 100-day SMA at $4,570.17 and the 200-day SMA at $4,495.01 fan out above price, reinforcing a capped structure, while the Relative Strength Index (14) at 38.65 sits below the midline and hints at lingering downside pressure rather than outright oversold conditions.
On the topside, initial resistance emerges at the 21-day SMA around $4,111, followed by a more significant barrier at the 50-day SMA near $4,332. Higher up, the 200-day SMA at $4,495 and the 100-day SMA close to $4,570 mark a broader supply zone that would need to be reclaimed to ease the current bearish tone. With no nearby technical floors indicated, any fresh decline from the current level would leave gold exposed to discovering new support levels on the way down, keeping rallies toward the mentioned moving averages vulnerable to selling interest.
(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.
