Gold sticks to recovery gains near $4,450 as traders await US CPI for Fed rate cues

Gold (XAU/USD) clings to modest recovery gains around $4,450 through the first half of the European session, albeit it lacks bullish conviction as traders await the release of US consumer inflation figures. Meanwhile, the US Producer Price Index (PPI) report, released on Thursday, lifted Federal Reserve (Fed) rate-hike bets. This continues to act as a tailwind for the US Dollar (USD) and caps the upside for the non-yielding bullion.

US CPI seen as key swing factor for next week’s Fed decision

Commerzbank’s Michael Pfister stresses that markets “have little time to catch their breath,” with today’s US CPI release “potentially tipping the scale for next week’s Fed meeting.” He argues that the inflation print will be pivotal not only for the immediate policy decision but also for the Dollar, given that investors are already pricing roughly 80 basis points of additional Fed tightening by mid-2027 on the back of higher Oil prices and expectations for a 0.4% monthly rise in headline CPI, even as core inflation remains more moderate and uncertainty around the new Fed Chair’s reaction function lingers.

The US Bureau of Labor Statistics (BLS) reported on Thursday that the headline PPI accelerated to a 5.4% YoY rate in August, compared to the previous month's upwardly revised print of 4.8% and estimates of 5.3%. Stripping out food and energy, the core gauge matched forecasts and rose 4.6% YoY from 4.3% in July. This comes on top of inflation risks stemming from elevated energy prices and reaffirms expectations that the US central bank will raise borrowing costs next week.

In fact, crude oil prices shot to the highest level since May 21 amid further escalation of tensions between the US and Iran. The US Treasury plans to sanction a large, undisclosed bank on Monday as part of its ongoing economic pressure campaign against Iran. Moreover, Iran-backed Houthis in Yemen seized the crucial Red Sea city of Mocha, expanding control over the strategic Bab al-Mandeb Strait and adding to growing market concerns about a prolonged disruption to oil supplies.

Meanwhile, US President Donald Trump said that the Iran war will likely continue until after the November midterm elections. This keeps the geopolitical risk premium in play, which might continue to support crude oil prices and the safe-haven Greenback. Hence, a strong US CPI number would push the USD higher, warranting some caution before placing bullish bets on gold. Nevertheless, the commodity remains on track to register weekly losses and depreciate further.

XAU/USD daily chart

Technical Analysis

The precious metal trades marginally above the 50% retracement at $4,320 and the 200-day Exponential Moving Average (EMA) at $4,313, keeping price supported by key medium-term trend references. However, momentum indicators are softening, with the Moving Average Convergence Divergence (MACD) in negative territory and the Relative Strength Index (RSI) hovering just below the 50 line, hinting at a waning bullish impulse rather than an outright reversal.

On the topside, initial resistance is aligned at the 38.2% Fibonacci retracement at $4,409, followed by a stronger barrier at the 23.6% retracement of $4,519. On the downside, immediate support is seen at the 50% retracement at $4,320, reinforced by the 200-day EMA at $4,313. A break below this area would expose the 61.8% retracement at $4,231 and then the 78.6% level at $4,104, with the prior cycle low around $3,943 acting as a more distant floor.

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