Gold weakens further below $5,200, refreshes daily low as traders await US CPI

Gold (XAU/USD) extends its steady intraday descent below the $5,200 mark and touches a fresh daily low during the first half of the European session on Wednesday. The US Dollar (USD) attracts some dip-buyers and looks to build on the overnight bounce from a one-week low, undermining the commodity. The USD uptick, however, lacks bullish conviction amid bets that Crude Oil prices are no longer high enough to limit the US Federal Reserve's (Fed) ability to cut interest rates. This, in turn, could act as a tailwind for the non-yielding yellow metal.

Crude Oil prices retreated sharply following a blowout rally to the highest level since June 2022, touched earlier this week, after US President Donald Trump hinted that the war in the Middle East could end soon. Moreover, the Wall Street Journal reported this Wednesday that the International Energy Agency (IEA) has proposed the largest release of oil reserves in its history in an effort to lower Crude prices amid the US-Israel conflict with Iran. This helps ease concerns about a potential war-driven surge in inflation and keeps hopes alive for further easing by the US central bank, which undermines the USD and supports the Gold price.

Meanwhile, there were no signs of an end to hostilities, with Iran experiencing the most intense US-Israeli bombardments on Tuesday. The Islamic Revolutionary Guard Corps (IRGC), on the other hand, escalated its operations against the US and Israel, and announced the start of targeting the enemy's technological infrastructure in the region. This keeps geopolitical risks in play, which keeps a lid on any optimism in the markets and turns out to be another factor benefiting the safe-haven Gold. Traders, however, refrain from placing aggressive directional bets and opt to wait for the latest US consumer inflation figures, due later today.

The US Consumer Price Index (CPI) will be looked upon for cues about the Fed's rate-cut path amid concerns that the closure of the Strait of Hormuz could lead to prolonged disruptions to oil supplies and rekindle inflation. This will be followed by the US Personal Consumption Expenditures (PCE) Price Index on Friday, which will play a key role in influencing the near-term USD price dynamics and provide a fresh impetus to the Gold. Nevertheless, the aforementioned fundamental backdrop seems tilted in favor of bullish traders, suggesting that any corrective slide could be seen as a buying opportunity and is likely to remain limited.

XAU/USD 1-hour chart

Gold technical setup backs the case for the emergence of dip-buying

The overnight breakout above the rising 100-hour Simple Moving Average (SMA) was seen as key triggers for the XAU/USD bulls. The lack of follow-through buying, however, warrants caution. The Moving Average Convergence Divergence (MACD) (12, 26, close, 9) now holds below its signal line in positive-to-flat territory with a negative histogram, suggesting fading upside momentum after the recent spike. Moreover, the Relative Strength Index (RSI) (14) has retreated from overbought readings above 70 to the mid-50s, indicating that buying pressure is cooling and favoring corrective downside while the larger structure remains supported.

Initial resistance emerges at the recent intraday high near $5,228, with a break above exposing the next upside leg toward the $5,260 area as bulls attempt to resume the broader advance. On the downside, immediate support stands at $5,190, ahead of a more important floor at $5,160, where prior reaction lows converge with the rising 100-period SMA to form a key demand zone. A clear drop through $5,160 would open the way toward $5,140, undermining the current bullish structure, while holding above $5,190 would keep the pullback contained and leave room for another test of $5,228.

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