XAU/USD Price Forecast: XAU/USD battles to recover the $4,100 mark

XAU/USD Current price: $4,092

• United States inflation rose by less than anticipated, according to the Consumer Price Index.
• Fed Chair Kevin Warsh testifies before Congress, focus remains on inflation.
• XAU/USD turned bullish in the near-term, but still needs to reconquer $4,100.

The US Dollar (USD) kicked off the day’s rally on the back of risk aversion, but abruptly changed course early in the American session. The XAU/USD pair, which traded as low as $3,983.85, jumped roughly $100 and peaked just above $4,100 before stabilizing nearby.

The initial strength resulted from persistent tensions in the Middle East, as the United States (US) and Iran are not only exchanging fire, but also keeping the Strait of Hormuz closed in their battle to control the critical sea passage.

The broad USD weakness was triggered by the US Consumer Price Index (CPI) report, which showed inflation rose at a softer-than-anticipated pace in June. Annual inflation, as measured by the change in the CPI, declined to 3.5% in June from the three-year high of 4.2% posted in May. The reading also came below the expected 3.8%. Inflation is key to determining the US monetary policy, and the June data cooled expectations for interest rate hikes, which anyway declined but did not disappear.

Other than that, Federal Reserve (Fed) Chairman Kevin Warsh is testifying on the Semiannual Monetary Policy Report before Congress. Warsh's hawkish stance was confirmed by his initial statement, in which he once again focused on price pressures, noting that the Fed has no tolerance for persistently elevated inflation.

XAU/USD short-term technical outlook

The near-term picture favors the upside. In the four-hour chart, XAU/USD advanced above the 100-period Simple Moving Average (SMA) at $4,082.01 and the 20-period SMA at $4,074.69. The clustering of these short- and medium-term SMAs beneath price suggests underlying demand after the latest rebound, while the 200-period SMA at $4,205.65 stays well overhead as a broader trend cap. Technical indicators turned sharply higher, although the Momentum indicator is stuck to its midline, while the Relative Strength Index (RSI) indicator aims north almost vertically at 54, leaning the risk to the upside.

In the daily chart, XAU/USD remains under pressure as it holds below the 20-day SMA at $4,103.90, while the 200-day and 100-day SMAs, well above at $4,495.40 and $4,570.95 respectively, reinforce a dominant bearish backdrop. Technical indicators aim higher, yet the Momentum is neutral while the RSI remains below its midline, reflecting the sharp advance rather than anticipating further gains.

On the downside, initial support is seen at the 20- and 100-period SMAs at around $4,080, where a break would expose the $4,030 price zone ahead of the recent relevant low at $3,941. On the topside, the 200-period SMA at $4,205.65 is the next relevant resistance level, with an interim threshold at around $4,130.

(The technical analysis of this story was written with the help of an AI tool. Know more.)