Gold price trends (XAU/USD) experienced a decline on Wednesday as investors adjusted their expectations for Federal Reserve policy. The release of US consumer inflation figures dampened hopes for aggressive Fed easing. Despite this, geopolitical tensions in the Middle East and a subdued US Dollar (USD) are helping gold regain strength.
Impact of US Inflation Data
On Wednesday, data revealed that US consumer prices increased as expected in July, which reduced speculation about a significant interest rate cut by the Federal Reserve in September. According to the Bureau of Labor Statistics (BLS), the headline US Consumer Price Index (CPI) rose by 0.2% in July, recovering from a 0.1% drop in June. The annual CPI increase fell below 3% for the first time in nearly three and a half years, indicating progress towards the Fed’s inflation goals.
The core CPI, excluding food and energy prices, also increased by 0.2% in July and eased to 3.2% for the year, down from 3.3% in June. Following this, the CME Group’s FedWatch Tool shows a 36% chance of a 50-basis point rate cut at the next FOMC meeting, compared to 50% before the CPI data release. This has led to a recovery in US Treasury bond yields and slightly supported the US Dollar, impacting gold prices negatively.
Geopolitical Risks and USD Demand
Geopolitical tensions, particularly the ongoing conflict between Israel and Hamas and potential Iranian threats, continue to support gold price trends. Despite a positive tone in equity markets, these risks are providing some support for the safe-haven metal. Negotiations for a ceasefire are underway, which could influence gold’s performance.
Technical Outlook for Gold Prices
Technically, the gold price’s recent low of around $2,438 is currently providing support. If gold falls below $2,424, it may weaken further towards the $2,400 mark and the 50-day Simple Moving Average (SMA) near $2,380. A break below this level might expose the 100-day SMA around $2,360, potentially triggering more significant losses.
However, oscillators on the daily chart are positive, suggesting potential for near-term gains. Resistance is expected near $2,471-$2,472 and the all-time peak around $2,483-$2,484. A rise beyond $2,500 could signal a breakout and further gains.
Conclusion
The gold price trends remains influenced by a mix of US economic data, geopolitical events, and technical factors. Investors are closely watching upcoming US macroeconomic data for clues on the next moves in gold prices.
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