Gold sticks to gains above $4,000; lacks bullish conviction ahead of US CPI, Fed's Warsh

Gold (XAU/USD) trims a part of its modest intraday recovery gains and remains within striking distance of a nearly two-week low touched earlier this Tuesday. The commodity, however, sticks to a positive bias above the $4,000 psychological mark through the first half of the European session amid mixed cues.

The US Dollar (USD) edges lower as bulls turn cautious ahead of the release of the latest US consumer inflation figures and Federal Reserve (Fed) Chair Kevin Warsh's inaugural congressional testimony. This, in turn, is seen as a key factor offering some support to the precious metal. However, escalating US-Iran tensions and firming Fed rate-hike expectations limit deeper USD losses, capping the upside for the yellow metal.

The US Consumer Price Index (CPI) report will be published later today and is expected to show a fall in the headline number amid a significant decline in gasoline prices during June. Meanwhile, the focus will be on the core CPI figures, which act as a primary gauge to track the underlying inflation trend. Furthermore, Fed Chair Kevin Warsh's inaugural semi-annual monetary policy testimony before the House Financial Services Committee will influence rate-hike bets. The outlook, in turn, will play a key role in influencing the near-term USD price dynamics and providing some meaningful impetus to the non-yielding Gold.

In the meantime, the closure of the Strait of Hormuz and escalating US-Iran tensions lift Crude Oil prices to a nearly one-month high, reigniting inflation fears and raising prospects of higher-for-longer US interest rates. The US military launched a third straight night of strikes against Iran on Monday after US President Donald Trump reimposed a naval blockade of Iranian ports. In response, Iran's Islamic Revolutionary Guard Corps (IRGC) targeted US facilities in the region, while two UAE tankers were hit by Iranian cruise missiles in the strait. Traders were quick to price in geopolitical risk premiums, which favors the USD bulls.

The aforementioned fundamental backdrop suggests that the path of least resistance for the Gold price remains to the downside. Hence, any subsequent recovery might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly. The XAU/USD pair seems vulnerable to decline further toward retesting the year-to-date low, around the $3,943-$3,942 region, touched on June 30.

XAU/USD daily chart

Gold bulls seem hesitant; descending channel resistance holds the key

From a technical perspective, the precious metal stays well below the 200-day Simple Moving Average (SMA) and keeps the broader tone bearish within a descending channel. Meanwhile, the Moving Average Convergence Divergence (MACD) is marginally positive, hinting at fading downside momentum. However, the Relative Strength Index (RSI) near 39 remains below the neutral line and reinforces a still fragile recovery rather than a confirmed bullish turn.

Hence, any subsequent move up is likely to be sold into and remain capped near the $4,100 mark. A sustained strength above could trigger a short-covering rally and lift the Gold price to the channel resistance, around $4,221. Some follow-through buying should expose the 200-day SMA pivotal resistance around $4,495.01, which, if cleared, would negate the bearish bias. On the downside, key support sits around $3,761.01 at the parallel channel boundary, and a decisive move back toward that zone would reopen the path for a deeper slide.

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