Gold Dips Toward $4,350 as Middle East Tensions Fuel Inflation Jitters Ahead of Key US Data

Gold prices (XAU/USD) slipped toward $4,350 during Wednesday’s early Asian session. The precious metal came under selling pressure as surging oil prices reignited inflation concerns and strengthened bets on a Federal Reserve rate hike in September. Market attention remains fixed on the upcoming US inflation figures.

Bloomberg reported Tuesday that US forces struck multiple Iranian tankers linked to the Islamic Revolutionary Guard Corps (IRGC) following attempted missile attacks on a US warship. Separately, Iran’s semi-official Mehr news agency reported explosions on Kharg Island, while Saudi Arabia confirmed that Houthi attacks had halted operations at several energy facilities.

Escalating Middle East tensions drove oil prices higher, stoking fears of persistent inflation and higher-for-longer interest rates — a dynamic that typically weighs on non-yielding bullion.

Traders are bracing for the release of US Producer Price Index (PPI) and Consumer Price Index (CPI) data later Wednesday, which could reshape expectations for the Fed’s next policy move.

“Higher oil prices are keeping inflation concerns alive, so this week’s US PPI and CPI will be key in determining whether yields extend higher or retrace,” said Christopher Wong, strategist at Oversea-Chinese Banking Corp.

The CME FedWatch tool shows traders pricing in roughly a 59.4% probability of a Federal Reserve rate increase this month.

Gold Traders Brace for Inflation-Driven Repricing of Fed Expectations

Commerzbank analysts warn that the current calm in gold masks the potential for a sharp shift in Fed pricing once US inflation data is released. With markets finely balanced on the prospect of a September move, “there is still considerable scope for a correction in interest rate expectations should the inflation data surprise significantly on the upside or downside,” the bank’s strategists noted. This leaves gold particularly sensitive to any deviation from consensus, as investors reassess the Fed’s likely trajectory.

Technical Analysis: Gold Retains a Neutral Tone in the Near Term

On the daily chart, XAU/USD sits just above the 100-day simple moving average (SMA) while trading below the 20-day Bollinger midline around $4,466, leaving the near-term bias broadly neutral and pointing to range-bound conditions. Price is effectively mid-band between the Bollinger lower and upper bands, with the Relative Strength Index (RSI) hovering near 47, indicating a lack of directional conviction after the recent pullback.

On the upside, initial resistance emerges at the 20-day Bollinger SMA around $4,465. A sustained break above this level would expose the upper Bollinger boundary near $4,675 as the next barrier. On the downside, immediate support lies at the 100-day SMA around $4,345, with the lower Bollinger band near $4,258 acting as a deeper support zone if sellers regain control.

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

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