Gold draws support from retreating USD; holds above $4,150 as traders await US CPI report

Gold (XAU/USD) ticks higher during the Asian session on Wednesday, holding above $4,150 as traders now look forward to the latest US inflation figures before placing fresh directional bets. The US Consumer Price Index (CPI) is due for release later today, followed by the Producer Price Index (PPI) on Thursday. Apart from this, US Federal Reserve (Fed) Chair Kevin Warsh's speech at the annual meetings of the IMF and World Bank in Bangkok on Friday will be looked upon for more cues about the future policy path. The outlook, in turn, will play a key role in driving the US Dollar (USD) and provide some meaningful impetus to the non-yielding yellow metal.

In the meantime, the CME Group's FedWatch Tool indicates that traders are assigning a nearly 90% chance that the US central bank will raise borrowing costs again at its December policy meeting. The bets were lifted by the recent hawkish comments from influential FOMC members, signaling openness to additional interest rate hikes before the end of the year amid persistent price pressures. Moreover, worries about energy-driven inflation risks underpin prospects for further Fed tightening, which might continue to act as a headwind for gold. In fact, crude oil prices rose to a nearly two-week top amid supply concerns due to escalating conflicts in the Middle East.

Fighting between the Iran-allied Houthis and Saudi Arabia has intensified over the past week in retaliation for the kingdom's support of ‌Yemeni government forces. Moreover, Houthi energy terminals and fuel reserves in Yemen were reportedly struck by a Saudi-led coalition. Meanwhile, tensions between the US and Iran also continued to simmer amid the standoff over the Strait of Hormuz. In fact, US Central Command rejected claims by the commander of Iran’s Islamic Revolutionary Guard Corps Navy that the strategic waterway is under Iran’s control and that any approaching US Navy warships would be sunk. This keeps the geopolitical risk premium firmly in play.

The USD, however, drifts lower for the second straight day, retreating further from its highest level since April 2025 and offering some support to gold. That said, the aforementioned bearish fundamental backdrop makes it prudent to wait for strong follow-through buying and a breakout through a short-term trading range held over the past two weeks or so before positioning for any meaningful upside for the XAU/USD pair.

XAU/USD 4-hour chart

Technical Analysis

Barring last week's knee-jerk fall to a two-month low, the range-bound price action might be categorized as a bearish consolidation phase against the backdrop of a decline from the August swing high. The Gold price, however, holds just above the 78.6% Fibonacci retracement at $4,115, suggesting a tentative floor. Meanwhile, the Moving Average Convergence Divergence (MACD) indicator stays in negative territory with a slightly contracting bearish histogram that hints at fading downside pressure. The Relative Strength Index (RSI) around 50 points to neutral momentum, reinforcing the idea of consolidation within a broader corrective phase rather than a fresh bullish leg.

Hence, any subsequent move up might continue to face stiff resistance at the 100-period Simple Moving Average (SMA) on the 4-hour chart, at $4,193. This is followed by the top boundary of the trading range, near the $4,215-$4,220 region, and the 61.8% Fibo. retracement at $4,238, with further barriers seen at $4,325, corresponding to the 50.0% retracement level. Above these, the 38.2% retracement at $4,412 and the 23.6% retracement at $4,519 mark progressively stronger supply zones. On the downside, immediate support is seen at the 78.6% retracement at $4,115, ahead of the prior cycle low area at $3,957.83. A sustained break below $4,115 would likely open the door for a deeper slide toward that lower structural base.

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