Gold holds steady above $4,400 as traders await US inflation data for Fed rate cues

• Gold attracts some dip-buyers on Thursday, though bulls seem hesitant ahead of US inflation data.
• The USD remains depressed amid the BoJ-inspired JPY rally, lending some support to the bullion.
• Inflation risks fuel hawkish central bank expectations and cap the upside for the XAU/USD pair.

Gold (XAU/USD) struggles to capitalize on a modest intraday uptick on Thursday and trades just above the $4,400 mark during the early European session. Moreover, the commodity holds comfortably above a one-week low, set on Wednesday, as traders keenly await the release of US inflation figures. The US Producer Price Index (PPI) will be published later today, while the US Consumer Price Index (CPI) is due on Friday. The data will provide more cues about the Federal Reserve's (Fed) policy path, which, in turn, will drive the US Dollar (USD) and provide a fresh directional impetus to the non-yielding bullion.

USD path hinges on US CPI as Fed decision looms

Strategists at Brown Brothers Harriman stress that Friday’s US August CPI release is “the main market driver that will decide the Fed’s September 16 rate decision.” They argue that “a hot CPI print would all but seal a September hike and underpin a firmer USD,” whereas “a cooler reading would strengthen the case for a hold and leave USD vulnerable to a dovish Fed repricing.”

In the meantime, markets are pricing in around a 60% chance that the US central bank will raise borrowing costs at its upcoming policy meeting on September 15-16. The bets were lifted by the better-than-expected US Nonfarm Payrolls (NFP) report last Friday. Moreover, inflation risks stemming from persistently higher energy prices underpin prospects for immediate Fed tightening. In fact, crude oil prices touched a fresh three-month high earlier today as a further escalation of tensions between the US and Iran keeps the geopolitical risk premium firmly in play.

In the latest developments, Iran attacked 10 ships near the Strait of Hormuz after the US announced it had sunk five Iranian oil tankers in the Gulf of Oman and near Kharg Island. This adds to concerns about a prolonged disruption to oil supplies from the Middle East and continues to support the black liquid, which further backs the case for a more hawkish stance from other major central banks. In fact, traders have fully priced in a 25-basis-point (bps) rate hike by the European Central Bank (ECB) later today and by the Bank of Japan (BoJ) at its September 17–18 meeting.

Moreover, the Reserve Bank of Australia (RBA) is also weighing a potential rate increase later this month. Meanwhile, US bond yields remain elevated amid the disappointment from the US Treasury's announcement that it would buy back up to $6 billion in 10-year to 20-year maturities, up from $2 billion previously. Media reports, however, suggested expectations had been for at least $10 billion. However, a hawkish BoJ-inspired rally in the Japanese Yen (JPY) keeps USD bulls on the back foot, which, in turn, is seen as a key factor that continues to act as a tailwind for the Gold price.

XAU/USD 4-hour chart

Technical Analysis

On the 4-hour chart, the precious metal holds above the 200-period Simple Moving Average (SMA) near $4,362 but remains below the 100-period SMA at about $4,491, leaving the broader tone neutral to slightly capped. Moreover, the 38.2% Fibonacci retracement at roughly $4,427 sits just overhead as immediate resistance. The positive move still appears tentative beneath this nearby ceiling despite a modestly positive Moving Average Convergence Divergence (MACD) reading and a Relative Strength Index (RSI) hovering around 51.

Sustained strength above the said barrier, however, should pave the way for additional gains to the 100-period SMA near $4,491, with the 23.6% retracement up at $4,530 acting as a higher hurdle if buyers gain traction. On the downside, the $4,362 region, where the 200-period SMA aligns above the 50% retracement near $4,344, offers initial support, with deeper cushions at the 61.8% level around $4,260 and the 78.6% retracement near $4,141 if selling pressure resumes.

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