Gold bears retain control as Iran tensions fuel inflation fears and revive Fed hike bets

• Gold meets with a fresh supply on Thursday as energy-driven inflation fears fuel Fed hike bets.
• Escalating US-Iran tensions support the safe-haven USD, which contributes to the intraday fall.
• The technical setup seems tilted in favor of bears and backs the case for further depreciation.

Gold (XAU/USD) sticks to modest intraday losses through the first half of the European session on Wednesday and currently trades near the lower end of its daily range, around the $4,025 region, down 0.85% for the day. Despite soft US Consumer Price Index (CPI) and Producer Price Index (PPI) reports, elevated crude oil prices keep the possibility of a US Federal Reserve (Fed) interest rate hike later this year firmly on the table. This, in turn, offers some support to the US Dollar (USD) and drives flows away from the non-yielding bullion.

The US Bureau of Labor Statistics (BLS) reported on Wednesday that the PPI unexpectedly fell 0.3% in June after a downwardly revised 0.6% rise in the previous month. Moreover, the yearly rate decelerated from 6% in May to 5.5% last month. This comes on top of the steepest month-on-month decline in the US CPI since April 2020 and indicates easing price pressures. Traders reacted by paring their expectations of an immediate Fed rate hike, which dragged the USD to its lowest level since June 18 and offered some support to the Gold price on Wednesday.

However, risks of the energy-driven inflation persist as crude oil prices stand firm near a one-month high amid escalating US-Iran tensions and supply disruptions in the Strait of Hormuz. In fact, the US carried out another round of airstrikes against Iran on Wednesday, targeting coastal defense systems and missile infrastructure. Iran responded with retaliatory drone and missile attacks on US-linked military facilities across the region. Moreover, US President Donald Trump warned that critical Iranian infrastructure could be targeted if the situation continues to deteriorate.

Adding to this, Iran's Islamic Revolutionary Guard Corps threatened to expand the conflict by targeting additional regional energy supply routes. This suggests that Iran could use its Houthi allies in Yemen to threaten shipping through the Bab el-Mandeb Strait. This continues to support crude oil prices, reviving inflationary fears and backing the case for at least one 25-basis-point (bps) Fed rate hike in 2026. This, in turn, might hold back the USD bears from placing aggressive bets and suggests that the path of least resistance for the Gold price remains to the downside.

XAU/USD daily chart

Gold could fall below $4,000 and retest weekly swing low

The XAU/USD pair keeps the near-term bias bearish below the 200-day Simple Moving Average (SMA) and within a broader downward parallel channel. However, mixed momentum indicators – a modestly positive Moving Average Convergence Divergence (MACD) reading around 9.43 and a Relative Strength Index (RSI) near 40.77 – hint at only tentative stabilization rather than a sustained recovery.

That said, a sustained break and acceptance below the $4,000 psychological mark would expose the year-to-date low, around the $3,943-$3,942 region, touched in June. The subsequent fall could extend further and drag the Gold price to a key structural support around $3,675.71, representing the lower band of the channel. A decisive break below this level would reinforce the prevailing bearish tone.

On the topside, initial resistance emerges at the upper boundary of the descending channel near $4,093.63, where any rebound would likely face selling pressure. A sustained break above that area would expose the 200-day SMA as the next significant barrier around $4,495.94.

(The technical analysis of this story was written with the help of an AI tool. Know more.)