Gold Price Pulls Back From June 5 High, Falls Below $4,400 as Inflation Fuels Fed Rate Hike Bets
Gold (XAU/USD) extended its daily corrective decline from its highest level since June 5, falling to a fresh intraday low near the $4,350 area during the first half of the European session on Tuesday.
Despite disappointing US Nonfarm Payrolls (NFP) data released on Friday, traders continue to price in the possibility that the US Federal Reserve (Fed) could raise borrowing costs by the end of the year amid renewed inflation risks stemming from volatile oil prices. This outlook tends to weigh on non-yielding gold and encourages traders to lock in some profits, particularly following the precious metal's strong rally over the past week.
Gold Technical Outlook Remains Constructive
From a technical perspective, a daily breakout above the 100-day Simple Moving Average (SMA) and the 50.0% Fibonacci retracement of the April–June move suggests that buyers remain in control.
Momentum indicators also support the constructive technical structure. The Relative Strength Index (RSI) is currently just below overbought territory at 68.89, while the Moving Average Convergence Divergence (MACD) histogram continues to expand in positive territory. This points to sustained upside momentum, although gold prices remain capped below the 200-day SMA at $4,498.
On the downside, a deeper pullback could expose the 38.2% Fibonacci retracement at $4,297, followed by the 23.6% retracement at $4,162. Further losses could bring the structural floor near $3,945 into focus.
On the upside, the $4,400 psychological level, followed by the daily swing high near $4,435, represents the first key resistance zone. A sustained break above this area could open the door toward the 61.8% Fibonacci retracement at $4,514.92.
Further gains could target the 78.6% Fibonacci retracement at $4,669, followed by the cycle high around $4,866.98.
Iran Tensions and Oil Prices Raise Inflation Concerns
Meanwhile, Iran has rejected the possibility of future negotiations with US President Donald Trump, saying it would wait until his term ends on January 20, 2029, before resuming talks. The development has dampened hopes for the reopening of the Strait of Hormuz.
Elsewhere, traffic through the Bab el-Mandeb Strait remains disrupted amid an Iran-backed Houthi blockade targeting Saudi Arabia. The situation triggered a sharp increase in crude oil prices overnight and revived concerns about inflation, reinforcing expectations for a more hawkish Federal Reserve stance.
The prospect of tighter monetary policy continues to support higher US Treasury yields. Rising yields can strengthen the US Dollar (USD) while putting additional pressure on non-yielding gold.
US CPI and PPI Data in Focus
Traders are now awaiting the release of the US Consumer Price Index (CPI) and Producer Price Index (PPI) on Wednesday and Thursday, respectively, for further clues about the Federal Reserve's future policy path.
The upcoming inflation reports could play a crucial role in shaping short-term US Dollar dynamics and determining the next major move in gold prices.
At the same time, further developments surrounding the Middle East crisis could continue to drive volatility across global financial markets, potentially creating fresh trading opportunities around the XAU/USD pair.