Gold Holds Near $4,650 as Markets Await US PCE Data and Fed Signaling

Gold (XAU/USD) oscillated within a narrow range around $4,650 during the Asian trading session on Wednesday, extending its two-day consolidation period. The precious metal remains close to its peak from mid-May, as market participants anticipate the US Personal Consumption Expenditures (PCE) Price Index for directional cues. Traders will also monitor Federal Reserve Chair Kevin Warsh’s remarks at the Jackson Hole Symposium for insights into the monetary policy trajectory, which will influence both the US Dollar and gold prices.

Market sentiment has increasingly favored a dovish stance ahead of the September 15–16 FOMC meeting, supported by moderating inflation and softening labor market indicators. Additionally, the US Treasury’s bond buyback program continues to exert downward pressure on government bond yields. Senior Treasury officials have indicated the possibility of utilizing nearly $1 trillion from the General Account to finance expanded purchases of longer-term securities. Separately, improved prospects for de-escalation in the Middle East have helped ease crude oil prices, reducing near-term inflation concerns and adding further weight to US debt instruments. This dynamic keeps the dollar index under pressure, providing supportive tailwinds for gold.

Oil prices slipped to their lowest level in nearly two weeks after Iran announced renewed discussions with Oman aimed at managing commercial vessel traffic through the Strait of Hormuz. Both nations indicated progress on establishing a temporary navigational corridor through the critical chokepoint. Concurrently, the United States extended sanctions relief and promised the lifting of the naval blockade in exchange for Iran’s commitment to reopening the Strait and ceasing support for regional proxy attacks. These developments have revived optimism regarding a diplomatic resolution to the ongoing US-Iran tensions, further undermining the dollar’s status as a global reserve currency and bolstering gold’s appeal.

XAU/USD daily chart

Technical Analysis

The decisive breakout above the $4,500 psychological barrier—coinciding with the 200-day Simple Moving Average (SMA) and the 38.2% Fibonacci retracement of the March-June decline—proved pivotal for XAU/USD bulls. However, the subsequent rally has struggled to sustain momentum beyond the 50% retracement level, suggesting caution is warranted before initiating fresh long positions.

The Relative Strength Index (RSI) hovering near 72 reflects overbought conditions, indicating that while upward momentum remains strong, a period of consolidation is likely. The Moving Average Convergence Divergence (MACD) indicator (12, 26, 9) continues to reside in positive territory, reinforcing the bullish structure even as momentum shows signs of extension. Still, gold enthusiasts may elect to await a clear close above $4,700 before adding to positions.

A confirmed breakout above $4,700 would open the path toward the 61.8% Fibonacci extension at $4,856, the 78.6% retracement at $5,104, and the recent cyclical high around $5,421. On the flip side, initial support is expected near the 200-day SMA at $4,522 and the adjacent 38.2% Fibonacci level at $4,508. Should sellers gain control, deeper retracements could test the 23.6% retracement at $4,292 and the major psychological floor close to $3,944.

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

Inflation FAQs

Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

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