Gold (XAU/USD) edges lower on Thursday as traders look past back-to-back, softer-than-expected US inflation reports and remain focused on renewed Middle East tensions, which are fueling concerns that higher energy prices could reignite inflationary pressure.

At the time of writing, XAU/USD trades around $4,015, down 1.10% on the day after hitting $3,974 earlier in the American session.

Both the US Consumer Price Index (CPI) and Producer Price Index (PPI) reports for June came in below market expectations. However, Gold failed to benefit as the softer readings merely pushed back expectations of a near-term Federal Reserve (Fed) interest rate hike.

Meanwhile, the US Dollar (USD) and US Treasury yields are staging a modest rebound after two consecutive days of losses, adding to the pressure on Gold.

Fed officials continue to stress the need to bring inflation sustainably back to the 2% target while noting that the labor market appears to have stabilized. This suggests that the central bank could raise interest rates later this year if inflation proves more persistent.

Elevated borrowing costs reduce Gold's appeal as investors seek higher returns from interest-bearing assets. Against this backdrop, Gold retains a downside bias, with sellers eyeing a sustained break below the $4,000 mark.

Data released on Thursday showed US Retail Sales rose 0.2% MoM in June, in line with expectations. May's reading was revised up slightly to 1.0% from 0.9%.

The Retail Sales Control Group also came in as expected at 0.5%, although it was lower than May's 0.8% increase. Initial Jobless Claims fell to 208K from 216K, beating expectations of 217K.

On the geopolitical front, the US carried out a fifth consecutive night of strikes against Iranian targets, while Tehran responded by targeting US assets in Kuwait, Bahrain and Jordan. Reuters reported that Iran had instructed Yemen’s Houthis to close the Bab el-Mandeb gateway to the Red Sea if the US attacks its power network.

Oil prices extended their gains following the report, with West Texas Intermediate (WTI) trading around $80.00, up nearly 12% so far this week.

Technical analysis: Sellers retain control as XAU/USD struggles below $4,200

On the daily chart, XAU/USD keeps a bearish bias as it remains well below the 200-day Simple Moving Average (SMA) at $4,495 and the 100-day SMA at $4,547.

Price is holding within a downward parallel channel, trading beneath its upper boundary around $4,200, while momentum is mixed. The Relative Strength Index (RSI) near 37 leans bearish, while the Moving Average Convergence Divergence (MACD) remains positive, yet with declining histogram bars, hinting that any rebound would still face structural headwinds overhead.

On the topside, immediate resistance is clustered around $4,200, where the horizontal cap and the channel’s upper line converge, before the more significant barriers at the 200-day SMA near $4,495 and the 100-day SMA close to $4,547.

On the downside, initial support appears at the $4,000 horizontal level, with a deeper cushion at the channel floor around $3,800.