Gold (XAU/USD) extends its steady intraday descent through the first half of the European session on Friday, hitting a fresh daily low around the $4,060 area. Inflation risks stemming from volatile crude oil prices keep bets of an interest rate hike by the US Federal Reserve (Fed) firmly on the table. This helps the US Dollar (USD) regain positive traction following the previous day’s decline to its lowest level since June, exerting pressure on the non-yielding yellow metal. Repeated failures to find acceptance above the $4,100 mark suggest that the path of least resistance for bullion remains to the downside.
US data released on Thursday pointed to moderating economic growth and signs of cooling inflation, which tempered bets for an immediate Fed rate hike and led to an overnight slump in the USD. The first estimate published by the US Bureau of Economic Analysis (BEA) showed that the US economy expanded at an annual rate of 1.5% in the second quarter, down from 2.1% in the prior quarter and below consensus estimates. The headline US Personal Consumption Expenditures (PCE) Price Index fell 0.1% in June, marking the first monthly decline since April 2020, as a temporary truce in the Iran conflict sent gas prices lower.
The yearly PCE rate decelerated from 4.1% to 3.7%, in line with market expectations. The core gauge — the Fed’s preferred measure of underlying inflation — rose by 0.1% during the month compared to 0.3% in May, and eased from 3.4% to 3.3% on an annual basis. However, volatile crude oil prices — driven by the US-Iran standoff and concerns about disruptions to global energy supplies — suggest that inflation remains a concern. In the latest developments, the US military announced it had completed a heavy wave of strikes against Iran in response to Iranian missile attacks on its forces in the Middle East.
Iran rejected Oman’s plan for a 50-50 joint management arrangement, which would have seen Tehran partially control the Strait of Hormuz and collect voluntary fees for using the waterway. Saudi Arabia, meanwhile, is building an international coalition to protect key shipping routes in the Bab al-Mandab Strait, the Red Sea, and the Gulf of Aden from attacks by Yemen’s Houthi militias. This raises the risk of a wider regional conflict, keeping the geopolitical risk premium in play and supporting crude oil prices. Investors remain concerned that rising energy prices could revive inflationary pressure and force the Fed to adopt a more hawkish stance.
According to the CME FedWatch Tool, traders are pricing in over an 85% chance that the US central bank will raise borrowing costs at least once by the end of this year. That outlook remains supportive of elevated US Treasury bond yields, which helps sustain USD demand and drives flows away from non-yielding Gold. Traders now look to the University of Michigan US Consumer Sentiment and Inflation Expectations Index for fresh direction. The XAU/USD pair remains confined within a multi-week trading range, awaiting a clear catalyst before committing to the next directional move.
XAU/USD Daily Chart
Technical Analysis: Bearish Setup Backs the Case for Deeper Losses
From a technical perspective, the range-bound price action over the past month may still be categorized as a bearish consolidation phase, set against the backdrop of a breakdown below the 200-day Simple Moving Average (SMA). That said, mixed momentum indicators warrant some caution. The Moving Average Convergence Divergence (MACD) histogram has eased slightly from recent highs but remains in positive territory, while the Relative Strength Index (RSI) hovers just under the 50 line, hinting at a weak recovery within a still-dominant downside backdrop.
On the upside, the top boundary of the trading range around $4,175 could act as an immediate hurdle ahead of $4,200. A break above that level should pave the way for additional gains toward the 200-day SMA at $4,490.81, a barrier bulls would need to clear to ease the prevailing bearish tone and open the door to a more sustained recovery. On the downside, immediate support is inferred from recent swing lows around the $3,976–$4,000 area, where buyers have previously emerged to defend price.
(The technical analysis in this article was written with the help of an AI tool. Know more.)
Gold FAQs
What role does Gold play as an asset? Gold has played a key role in human history as a store of value and medium of exchange. Beyond its use in jewelry, the precious metal is widely regarded as a safe-haven asset, considered a sound investment during turbulent times. Gold is also seen as a hedge against inflation and depreciating currencies, as it does not rely on any specific issuer or government.
Why do central banks buy Gold? Central banks are the largest Gold holders. In their aim to support their currencies during turbulent times, central banks tend to diversify their reserves by buying Gold to improve the perceived strength of the economy and currency. High Gold reserves can signal a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to the World Gold Council — the highest yearly purchase since records began. Central banks from emerging economies such as China, India, and Turkey are rapidly increasing their Gold reserves.
How does Gold correlate with the Dollar and other assets? Gold has an inverse correlation with the US Dollar and US Treasuries, both of which are major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify in turbulent times. Gold is also inversely correlated with risk assets — a rally in equities tends to weaken Gold prices, while sell-offs in riskier markets tend to favor the precious metal.
What factors drive the price of Gold? Gold prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly push Gold higher due to its safe-haven status. As a yield-less asset, Gold tends to rise when interest rates fall, while higher borrowing costs typically weigh on the metal. Most moves ultimately depend on the behavior of the US Dollar, as Gold is priced in dollars (XAU/USD). A strong Dollar tends to keep Gold prices in check, while a weaker Dollar is likely to push them higher.
