Gold is hanging close to one-week lows near $4,310 early Friday, nursing heavy losses after the US Producer Price Index (PPI) data release and the recent upsurge in Oil prices.
Gold’s next major move depends on US inflation
Gold is looking to recover a part of the previous heavy losses as traders resort to repositioning ahead of the all-important US Consumer Price Index (CPI) inflation report.
The CPI data is the last major final inflation release before the Federal Reserve’s (Fed) September 15-16 monetary policy meeting, making it one of the most defining data points for deciding whether the Fed opts for an interest-rate hike or keeps rates unchanged.
Markets ramped up their bets on a September rate hike to 72% after a hot US PPI reading, from roughly 60% seen pre-data, according to the CME Group’s FedWatch Tool.
The PPI rose 0.4% last month after an upwardly revised 0.1% gain in July. In the 12 months through August, the PPI advanced 5.4% after rising 4.8% in July.
That gave a strong lift to the US Dollar (USD) across the board, further helped by surging US Treasury bond yields on rising inflation expectations, weighing negatively on the non-yielding Gold.
Inflation concerns were aggravated as Oil prices topped $100 for the first time in nearly four months amid widening Middle East conflict.
Iran-backed Houthis seized control of Yemen’s port city of Mocha on Thursday and advanced down the Red Sea coast to strategic islands, BBC News reported, citing military sources.
At the same time, traffic in Hormuz remained restricted, while US officials cited by the Wall Street Journal (WSJ) revealed that Iran has ramped up its ballistic missile production again.
Gold’s next major move now depends on US CPI data, with all eyes on core readings as they present a real picture to the Fed, shielding from the war-driven impact on energy prices.
Annual core CPI is seen rising by 2.4% in August, slowing slightly from a 2.5% increase in July. Over the month, core CPI inflation is expected to steady at 0.2% in the same period.
An upside surprise in core prints could reinforce the Fed’s hawkish expectations, confirming a rate hike next week. That could strengthen the USD and Treasury bond yields, sending Gold sharply lower.
On the other hand, softer-than-expected core CPI data could prompt markets to scale back their September Fed rate hike bets, reviving buying interest in the bullion at the expense of the buck.
Gold bulls eye inflation data as Fed risks seen delaying, not derailing, next leg higher
According to TD Securities, precious metals are effectively “wait[ing] on inflation data,” with the upcoming US release framed as “the next big catalyst.” The bank argues that “an upside surprise would embolden Fed pricing and weigh on the yellow metal,” whereas “less worrisome inflation could ultimately be the first catalyst to see the next wave of discretionary positioning start to enter the market.” At the same time, TD Securities stresses that the broader backdrop remains constructive, noting that “with the precious metal landscape still broadly supported by the renewed Dollar-debasement theme, elevated central bank buying and renewed ETF accumulation, a hawkish Fed may only postpone the timing of the next leg higher rather than catalyze material downside.”
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,320.40, maintaining a cautious bearish tone as it sits between the clustered overhead moving averages and the closer 50-day simple moving average (SMA) below price. Spot gold holds above the 50-day SMA at $4,268.52, which offers initial trend support, but it remains capped beneath the 100-day SMA at $4,335.42 with the 21-day and 200-day SMAs higher still, suggesting rallies are vulnerable while this structure holds. The Relative Strength Index (14) around 45 hints at fading bullish momentum and aligns with the idea of a consolidative-to-soft bias rather than an impulsive recovery.
On the topside, immediate resistance is seen at the 100-day SMA near $4,335.42; a daily close above this barrier would open the way toward the 21-day SMA at $4,457.52, with the longer-term cap at the 200-day SMA around $4,538.45. On the downside, the 50-day SMA at $4,268.52 is the key support level to watch; a break below this floor on closing prices would likely reinforce downside pressure and expose deeper corrective potential toward prior swing areas not captured by the current moving-average set.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
Consumer Price Index ex Food & Energy (MoM)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as the Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The MoM print compares the prices of goods in the reference month to the previous month.The CPI Ex Food & Energy excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
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Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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