Key Takeaways:
Gold held above $4,400 an ounce, near two-month highs, as traders awaited US CPI data that could determine whether the rally extends toward $4,500.
"Inflation days typically produce larger gold trading ranges, with the average intraday range at 1.54 percent versus 1.41 percent on other sessions," David Scutt, market analyst at FOREX.com, said.
The advance has held despite a firmer dollar and higher Treasury yields. The 10-year yield fell to 4.64 percent from 4.74 percent the prior week after July payrolls contracted by 23,000 jobs, the first negative print in over two years. Brent crude rebounded from about $70 toward $90 per barrel, while WTI fell about 5 percent to around $77.90.
The US$4,460 to US$4,500 zone is the key test. A softer CPI reading could reinforce expectations the Fed holds rates steady at its September 16 meeting — futures price roughly 56 percent odds — while a hot print could revive tightening bets and pressure bullion.
Inflation Data Could Decide Whether $4,500 Holds
The next CPI and PPI releases matter because energy prices have become a more direct threat to the inflation outlook. Brent crude has risen as uncertainty persists around the reopening of the Strait of Hormuz. Iran has indicated it is nearing an agreement with Oman on new shipping lanes but has maintained that the US must meet further conditions before the waterway can reopen.
Economists project a 0.1 percent month-over-month increase in headline CPI for July, following June's 0.4 percent decline. Core CPI is expected at 0.2 percent monthly and 2.5 percent year-over-year.
A softer reading could reinforce the view that the Fed has less reason to tighten further, easing pressure from yields and supporting gold's recovery. A higher reading could lift the dollar and Treasury yields if markets expect policy to remain restrictive for longer.
PBoC Buying and Technical Levels
The People's Bank of China increased its gold holdings in July by the largest amount since October 2023, extending a pattern of official-sector buying as central banks diversify reserve holdings. This does not mean central-bank purchases prevent gold from falling when yields rise, but it can make the market less dependent on one source of investor demand.
For Australian traders, gold shares such as Northern Star Resources, Evolution Mining and Newmont can move differently from bullion. These producers can be influenced by a stronger US-dollar gold price, but their shares also react to production results, costs and mine-specific operational issues.
XAU/USD failed to hold above the 100-day moving average on Tuesday, leaving behind a daily candle resembling a shooting star. The price continues to find support around $4,367, a level that has acted as both support and resistance earlier this year. If the price breaks below and holds there, shorts could target $4,300 initially before $4,200. If the price holds above $4,367, pullbacks could be bought with the first target at Tuesday's high around $4,435, with the 200-day simple moving average near the psychologically important $4,500 level beyond that.
Gold's recovery has drawn strength from both safe-haven demand and a softer US labour-market signal. The next inflation reports will show whether those forces are strong enough to overcome higher yields and oil-driven inflation risk.
This article is for informational purposes only and does not constitute investment advice.
