Gold (XAU/USD) edges lower on “inside trading” on Wednesday, with price action contained within Tuesday’s range, as the pair keeps looking for direction above the $4,000 level. Rising tensions in Iran and high Oil prices have offset the positive impact from the soft US Consumer Price Index (CPI) data.
US data released on Tuesday revealed that inflationary pressures eased beyond expectations in June. Yearly CPI slowed down to 3.5% from 4.2% in May, well below the 3.8% market consensus, and monthly inflation contracted 0.4%, its largest decline in nearly six years. These figures triggered a significant repricing of Federal Reserve (Fed) rate hikes and sent the USD lower across the board
Precious metals, however, have failed to capitalise on the US Dollar’s weakness amid escalating hostilities between the US and Iran. Threats of further attacks and the closure of more energy routes are underpinning OIil prices near one-month highs, fuelling expectations of higher inflationary pressures and global monetary tightening.
XAU/USD trades at $4,027, still capped below the downward trend-line barrier yet with the Relative Strength Index (14) on the daily chart showing a bullish divergence as it reaches the neutral territory in the 40 area. The Moving Average Convergence Divergence (MACD) remains in positive territory yet at levels suggesting that bullish attempts remain frail.
Gold bulls should break the mentioned trendline, now around $4,100 and the July 7 high, in the $4,200 area to confirm a trend shift and gain confidence to pursue a deeper correction. On the downside, the precious metal has a cluster of supports between Thursday's low in the $4,020 area and the late October 2025 lows near $3,885.