Gold Consolidates Near Seven-Month Low Ahead Of US PCE Report

• Gold consolidates near more than seven-month lows ahead of the US PCE inflation report.

• A stronger-than-expected inflation reading could reinforce Fed rate-hike expectations and weigh further on Gold.

• Technically, XAU/USD remains in a well-defined downtrend, with oversold signals beginning to emerge.

Gold (XAU/USD) consolidates modest losses on Thursday as traders reduce exposure ahead of the US Personal Consumption Expenditures (PCE) Price Index report, due at 12:30 GMT. At the time of writing, XAU/USD trades around $3,983, hovering near the more than seven-month low touched on Wednesday.

Economists expect the headline PCE to accelerate to 4.1% YoY in May from 3.8% in April. Core PCE is forecast to edge up to 3.4% YoY from 3.3%.

The move below the $4,000 psychological level leaves XAU/USD nearly 28% below its all-time high near $5,600 reached in January.

The decline was largely driven by the fallout from the US-Iran war, which boosted the US Dollar (USD), triggered liquidity-driven selling and fueled expectations that the Federal Reserve (Fed) could raise interest rates later this year as elevated Oil prices pushed inflation higher.

However, traders appear hesitant to push Gold decisively below the $4,000 psychological level ahead of the US inflation data, which could determine whether the precious metal extends its sell-off or rebounds above $4,000.

Traders are currently pricing in a 67% chance of a Fed rate hike in September, according to the CME FedWatch Tool.

If inflation comes in above expectations, markets are likely to increase bets on a Fed rate hike later this year, boosting the US Dollar further and weighing on Gold. By contrast, weaker inflation figures could prompt traders to scale back those expectations, offering some relief to the precious metal.

However, with Oil prices back to pre-war levels, fears of a sustained inflationary shock have eased. Even so, inflation remains well above the Fed's 2% target, suggesting monetary policy is likely to stay restrictive for longer. As a result, Gold could remain under bearish pressure.

On the geopolitical front, shipping through the Strait of Hormuz continues to improve following the interim peace agreement between the United States and Iran. The latest round of talks revealed that differences remain over inspections of Iran's nuclear program and the future management of the Strait.

Technical Analysis: Bearish trend remains intact as oversold signals emerge

On the daily chart, XAU/USD remains bearish as price holds well below the 200-day Simple Moving Average (SMA) at $4,474 and the 100-day SMA at $4,690.

The metal also remains under a downward sloping resistance trend line, whose break level comes in near $4,350, while the Relative Strength Index (RSI) at 29.87 slips into oversold territory, hinting that while selling pressure dominates, the downside could become vulnerable to short-covering bounces.

On the upside, initial resistance is seen at the horizontal barrier around $4,200, with the descending trend-line break level near $4,350 reinforcing this supply zone. Above that, the 200-day SMA at $4,474 and the 100-day SMA at $4,690 form a broader medium-term resistance band that would need to be reclaimed to ease the prevailing bearish structure.

On the downside, the next notable cushion is the horizontal support at $3,900.00, and a clear break beneath this floor would expose the metal to a deeper corrective phase despite the emerging oversold signals on momentum.