Gold price (XAU/USD) attracts some sellers below $4,600 during the early European trading hours on Friday. The precious metal retreats from a three-month high as in-line US inflation data has reinforced the possibility of further Federal Reserve (Fed) rate hikes. Traders await Fed Chair Kevin Warsh's speech at the Jackson Hole Economic Symposium on Friday for fresh impetus.
The core Personal Consumption Expenditures (PCE) Price Index inflation, the Fed's preferred inflation gauge, held steady at 3.3% YoY in July, the US Bureau of Economic Analysis (BEA) revealed on Wednesday. This figure came in line with market expectations. On a monthly basis, the headline PCE Price Index and the core PCE Price Index both rose by 0.2% in July.
Following the data release, the market significantly increased its bets on a September rate increase. According to the CME FedWatch Tool, the probability of a Fed rate hike in September rose to 40% from 36% before the data release. This, in turn, could weigh on the yellow metal. Gold is often used as a hedge against inflation but does not yield interest, making it less attractive when interest rates are high.
On the other hand, optimism for a reopening of the Strait of Hormuz amid diplomatic efforts involving Iran and Oman might ease oil-driven inflation concerns, capping the downside for gold.
Iran’s Security Chief Mohsen Rezaei said on Friday that Tehran is preparing a list of its conditions to open the Strait of Hormuz in response to a request by mediators, adding that conditions include ending the war in the region, per Reuters.
Gold sentiment seen as resilient even if Fed turns more hawkish
According to TD Securities, a shift in tone from Fed Chair Warsh remains a key risk for bullion, with the bank cautioning that “a more hawkish tone from Fed Chair Warsh would be a catalyst for some reversal in the yellow metal.” However, the strategists argue that “the bar is likely high to reverse the improved sentiment in precious metals,” suggesting that any policy surprise would need to be substantial to materially undermine the current constructive backdrop for gold.
XAU/USD daily chart
Technical Analysis: Gold price maintains a constructive outlook above the 100-day SMA
In the daily chart, XAU/USD holds well above its 100-day simple moving average (SMA) and the 20-day Bollinger middle band, keeping the near-term bias bullish despite the recent pullback from record highs. The Relative Strength Index (14) around 65 shows positive momentum but shy of extreme overbought, suggesting upside pressure persists, although the proximity of overbought territory hints that the advance could become more labored as price stretches further from underlying trend support.
On the topside, immediate resistance is located at the upper boundary of Bollinger band near $4,760, where previous upside extensions could face renewed selling interest. On the downside, initial support is seen around the current area near $4,585, with stronger demand anticipated at the middle Bollinger Band at $4,415 and the 100-day SMA at $4,375; a deeper slide toward the lower limit of Bollinger band at $4,073.52 would only come into view if those trend supports give way, which for now looks less likely while daily momentum remains constructive.
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