Gold Price Forecast: XAU/USD remains a ‘sell-on-rise’ trade amid US-Iran hostilities
- Gold returns to the red below $4,050 early Wednesday as ongoing US-Iran attacks boost Oil prices and inflation woes.
- The US Dollar stays defensive following soft US inflation data and reduced hawkish Fed bets.
- Daily technical setup suggests Gold remains a ‘sell-on-rise’ trade, with $4,000 likely at risk again.
Gold is resuming its downtrend toward two-week lows near $3,985 early Wednesday, following a temporary pullback seen on Tuesday, as there seems to be no end to the renewed hostilities between the United States (US) and Iran concerning the Strait of Hormuz.
Gold: Sellers are back in control
In the latest US escalation of the conflict, US President Donald Trump on Tuesday said that it reimposed a naval blockade of all Iranian ports and threatened to hit power plants and bridges next week unless Tehran resumes negotiations.
Trump further stated that the US conducted discussions with Iran on Tuesday, adding that Washington urged Tehran to reach an agreement.
On the Iranian side, the Islamic Revolutionary Guards Corps (IRGC) said on Wednesday that the “Strait of Hormuz will remain closed until the 'end of America’s evils.”
The IRGC added that they attacked several US bases and military across Gulf states, including Kuwait, Bahrain and Jordan, citing these attacks as a response to the US hostilities.
Subsequently, the US military's Central Command (CENTCOM) confirmed that it struck dozens of military sites near the Strait of Hormuz, a critical chokepoint to almost 20% of the global energy supply, and the Iranian coast.
This escalation is driving another leg up in Oil prices, with the US benchmark – WTI sitting close to monthly highs above $80.50. Markets remain concerned that the ongoing surge in Oil prices could aggravate inflation worries and prompt the US Federal Reserve (Fed) to deliver on its two interest rate hike projections for this year.
This narrative continues to undermine any recovery attempts in the non-yielding Gold, even as US Dollar (USD) buyers remain on the defensive, following a softer-than-expected June Consumer Price Index (CPI) report.
US core inflation, which excludes food and energy, was flat on the month, putting the 12-month rate at 2.6%, which undershot expectations of 0.2% and 2.9%, respectively.
Softer inflation prints did briefly provide gold buyers some relief, but Fed Chair Kevin Warsh’s comments at the congressional testimony spoiled their party.
Warsh said: “There might be some that look at this morning’s data and say, ‘Oh, mission accomplished, everything is swell. That is not my view.”
Fed Chair Warsh’s testimony scores 7/10 on the FXS Speechtracker, broadly in line with the historical average and signaling a steady, not escalated, hawkish stance.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated level of 127.19, confirming that the speech leaves the overall policy tone firmly in hawkish territory. With the index well above the neutral 100 mark and the speech score matching the established baseline, markets are likely to interpret Warsh’s remarks as a continuation of a strong anti-inflation stance rather than a fresh hawkish surprise.
Therefore, Gold sellers keep lurking at higher levels, creating ‘sell-on-rise ’opportunities and downside risks intact for bright metal traders.
Next of note for Gold traders are the US Producer Price Index (PPI) data and a slew of speeches from Fed policymakers, including Kevin Warsh. Warsh is due to testify on the Semi-annual Monetary Policy Report before the US Senate Committee on Banking, Housing and Urban Affairs.
A potential slowdown in the underlying factory-gate inflation could further scale back Fed rate hike bets and trigger a fresh rebound in Gold.
But will it last? Because the bullion’s daily technical setup continues to paint a bearish picture in the near term.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,030.48, keeping a bearish near-term bias as spot holds below the 21-day simple moving average (SMA) at $4,098.48 and well under the 50-day SMA at $4,319.22. The longer-term moving averages reinforce this capped tone, with the 200-day SMA at $4,495.55 and the 100-day SMA at $4,559.21 clustering far above current levels. The Relative Strength Index (14) at 40.38 sits in mildly negative territory, hinting at persistent downside pressure rather than an oversold condition.
On the topside, immediate resistance emerges at the 21-day SMA near $4,098, followed by a more significant barrier at the 50-day SMA around $4,319, where a recovery would need to gain traction to ease the current bearish structure. Higher up, the 200-day SMA at $4,495 and the 100-day SMA at $4,559 form a broader resistance band that is likely to cap any deeper corrective bounce while price remains entrenched below them. With no clear moving-average support close by, any fresh slide from present levels would leave gold relying on uncharted horizontal demand zones not captured by the current indicator set.
(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.
