Gold (XAU/USD) holds firm on Friday but lacks bullish momentum as rising Oil prices revive inflation concerns and reinforce expectations that the Federal Reserve (Fed) could raise interest rates later this year.
Meanwhile, the US Dollar (USD) stages a comeback after falling earlier this week following softer-than-expected US inflation data.
This keeps the hawkish Fed narrative alive, even as softer US inflation data released this week prompted traders to scale back bets on a near-term interest rate hike.
According to the CME FedWatch Tool, markets currently price in around a 73% chance that the Fed will raise interest rates by December.
Recent hawkish remarks from Fed officials have also kept the possibility of tighter monetary policy on the table.
Gold (XAU/USD) holds firm on Friday but lacks bullish momentum as rising Oil prices revive inflation concerns and reinforce expectations that the Federal Reserve (Fed) could raise interest rates later this year.
At the time of writing, XAU/USD trades around $3,992 after hitting an intraday low of $3,959, its lowest level since July 1.
Meanwhile, the US Dollar (USD) stages a comeback after falling earlier this week following softer-than-expected US inflation data. The recovery in the Greenback limits Gold’s upside and keeps the precious metal on track for a second consecutive weekly loss.
The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 100.76 after hitting a more than three-week low of 100.35 on Wednesday.
The United States (US) carried out strikes against Iran for a sixth consecutive night, while Tehran responded with missile and drone attacks on US military facilities across the Middle East.
Iran’s Revolutionary Guard Corps said no Oil or gas exports would pass through the Strait of Hormuz as long as US attacks persist, according to the Tasnim news agency.
The longer the disruption to traffic through the Strait lasts, the greater the upside risks to energy prices and inflation, factors that tend to weigh on Gold.
This keeps the hawkish Fed narrative alive, even as softer US inflation data released this week prompted traders to scale back bets on a near-term interest rate hike.
According to the CME FedWatch Tool, markets currently price in around a 73% chance that the Fed will raise interest rates by December.
Recent hawkish remarks from Fed officials have also kept the possibility of tighter monetary policy on the table. Dallas Fed President Lorie Logan said on Thursday that “modestly higher interest rates would better balance the outlook and risks,” adding that inflation does not appear to be heading sustainably back to the 2% target on its own.
On the data front, the preliminary University of Michigan Consumer Sentiment Index rose to 54.4 in July from 49.5 in June, beating the market forecast of 51. One-year Consumer Inflation Expectations from the University of Michigan eased to 4.2% from 4.6%, while the five-year measure held unchanged at 3.3%.
Technical analysis: XAU/USD bears retain control below Bollinger mid-band
In the daily chart, XAU/USD remains under pressure, trading below the Bollinger Bands 20-day Simple Moving Average (SMA) at $4,072. The Relative Strength Index (RSI) at 39.12 is still below the 50 line, while the Average Directional Index (ADX) near 39.77 suggests the prevailing downtrend retains notable strength.
On the upside, initial resistance sits at the Bollinger middle band at $4,072, followed by the confluence of the upper band at $4,199 and the horizontal barrier at $4,200. Beyond that, the next major hurdle emerges at $4,400.
On the downside, immediate support is seen at the lower Bollinger band near $3,945, before the more pronounced horizontal floor at $3,800, where sellers could look to extend the current bearish phase if the latter gives way.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
