Gold Recovers Above $4,000 as Markets Await US CPI Data and Fed Chair Warsh Testimony
Gold prices extended their intraday recovery on Tuesday, climbing back above the $4,000 mark after touching their lowest level in nearly two weeks during the Asian session. The rebound was supported by a pause in the US dollar's two-day rally as investors turned cautious ahead of the release of the latest US Consumer Price Index (CPI) report and Federal Reserve Chair Kevin Warsh's testimony before Congress.
The weaker US dollar provided short-term support for bullion, although broader market sentiment remains cautious as traders assess the outlook for inflation and future Federal Reserve interest rate decisions.
Gold Technical Outlook Remains Bearish Despite Recovery
From a technical perspective, gold continues to trade well below its 200-day Simple Moving Average (SMA), maintaining a broader bearish outlook within a descending channel pattern.
Momentum indicators suggest selling pressure is beginning to ease. The Moving Average Convergence Divergence (MACD) has turned slightly positive, indicating that bearish momentum is fading. However, the Relative Strength Index (RSI) remains around 39, below the neutral 50 level, suggesting that the current rebound is still fragile rather than the start of a confirmed bullish reversal.
Any further upside is likely to face strong selling pressure around the $4,100 resistance level. A sustained breakout above that area could trigger short-covering activity and lift gold toward the upper boundary of the descending channel near $4,221.
Additional buying momentum could then target the key 200-day SMA at $4,495.01. A decisive move above this level would invalidate the current bearish outlook.
On the downside, immediate support is located near $3,761.01, around the lower boundary of the channel. A decisive break below this level could accelerate losses and expose deeper downside risks.
US CPI and Fed Testimony Take Center Stage
Escalating tensions between the United States and Iran, combined with growing expectations for another Federal Reserve rate hike, have continued to support the US dollar, prompting traders to remain cautious about chasing further gains in gold.
Markets are now focused on the release of the US Consumer Price Index (CPI) later today. Headline inflation is expected to ease, largely reflecting lower gasoline prices during June. However, investors will pay closer attention to the Core CPI, which excludes volatile food and energy prices and is considered the Federal Reserve's preferred gauge of underlying inflation trends.
Adding to market volatility, Federal Reserve Chair Kevin Warsh is scheduled to deliver his first semiannual monetary policy testimony before the House Financial Services Committee. His comments are expected to provide fresh guidance on the Fed's interest rate outlook and could significantly influence short-term movements in both the US dollar and gold prices.
Middle East Conflict Keeps Inflation Risks Elevated
Meanwhile, renewed geopolitical tensions continue to support safe-haven demand while also boosting energy prices.
The closure of the Strait of Hormuz and escalating military confrontation between the United States and Iran pushed crude oil prices to their highest level in nearly a month, reigniting concerns that higher energy costs could keep inflation elevated and force the Federal Reserve to maintain restrictive monetary policy for longer.
The US military launched a third consecutive night of strikes against Iranian targets after President Donald Trump reinstated a naval blockade on Iranian ports. In response, Iran's Islamic Revolutionary Guard Corps (IRGC) targeted US facilities across the region, while two UAE oil tankers were reportedly struck by Iranian cruise missiles in the Strait of Hormuz.
The escalating conflict prompted traders to quickly price in additional geopolitical risk, strengthening demand for the US dollar.
Despite gold's latest rebound, the overall fundamental backdrop suggests that rallies may continue to attract sellers. As a result, the XAU/USD pair remains vulnerable to another decline toward its year-to-date low around $3,943–$3,942, last recorded on June 30.