Gold sits near two-month top, above $4,400 as traders eye US CPI for Fed cues

• Gold regains positive traction on Wednesday, though the upside potential seems limited.
• Geopolitical risks and Fed-hike bets support the safe-haven USD, which could cap gains.
• Traders might also opt to move to the sidelines ahead of the crucial US inflation figures.

Gold (XAU/USD) maintains its bid tone above the $4,400 mark through the first half of the European session and remains close to the highest level since June 5, touched on Tuesday. Traders now look forward to the release of the US Consumer Price Index (CPI) report for more cues about the US Federal Reserve's (Fed) future policy path amid inflation risks stemming from volatile oil prices. This, in turn, will drive the US Dollar (USD) and provide some meaningful impetus to the non-yielding yellow metal.

Heading into the key data risk, oil prices stand firm near a one-and-a-half-week high amid fading hopes for a swift reopening of the Strait of Hormuz. In fact, an advisor to Iran’s Supreme Leader Mojtaba Khamenei said that the critical waterway will not be opened until the US meets Tehran's demands. Adding to this, Iran-backed Houthi rebels in Yemen escalated attacks on vessels in the Red Sea and Bab el-Mandeb, particularly targeting Saudi-linked ships. The latest developments keep war-risk premiums in play and act as a tailwind for crude oil prices, fueling inflation fears.

Analysts at Commerzbank highlight that “hopes for a new agreement between Iran and the US in the near future and for the Strait of Hormuz to be reopened are fading,” after diplomatic positions hardened over the weekend. They note that Iran “set out its conditions for reopening the strait” – including “demands for reparations” – while US President Trump countered with “a new demand for compensation payments for the victims of the conflict.” According to Commerzbank, this escalation in mutual demands underscores the diminishing likelihood of a near-term deal to restore full transit through the key shipping corridor, reinforcing the current risk premium embedded in energy markets.

This offsets signs of a cooling US labor market and underpins the case for the Fed to hike interest rates. According to CME Group's FedWatch Tool, traders are still pricing in over a 75% chance that the US central bank will raise borrowing costs at least once by the end of this year. The outlook remains supportive of elevated US Treasury bond yields, which, along with persistent geopolitical uncertainties, should benefit the safe-haven USD. Against the backdrop of the US-Iran standoff, Asia was rattled by an early morning ballistic missile launch by North Korea.

This comes days ahead of major joint military exercises by South Korea and the US. Meanwhile, Taiwan condemned planned naval drills between China and an Indonesian warship off the island's east coast. This favors USD bulls and warrants some caution before positioning for an extension of Gold's recent strong positive move witnessed over the past week or so.

XAU/USD daily chart

Technical Analysis

The metal is hovering around the 100-day Simple Moving Average (SMA), though it remains capped beneath a dense band of overhead resistance, starting with the 50.0% Fibonacci retracement of the April-June fall and extending toward the 200-day SMA at $4,500.51, suggesting that bulls need a clear break higher to regain control.

On the downside, immediate support is provided by the 100-day SMA at $4,388.33, with further cushions at the 38.2% retracement at $4,298.48 and the 23.6% level at $4,161.40. A break below the latter could expose the structural floor around $3,939.81.

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