Gold (XAU/USD) sticks to its bearish bias for the third straight day – also the sixth day in the previous seven – and trades below the $4,000 psychological mark heading into the European session on Thursday. The commodity remains close to its lowest level since November 2025, touched on Wednesday, as traders keenly await the release of the US Personal Consumption Expenditures (PCE) Price Index. The crucial inflation data will dictate the Federal Reserve’s (Fed) policy path and, in turn, will affect the non-yielding bullion.
In the meantime, inflation fears have receded recently as Crude Oil prices have fallen significantly following the reopening of the Strait of Hormuz. Furthermore, a temporary 60-day sanctions waiver that authorizes the production, delivery, and sale of Iranian crude oil, petroleum, and petrochemical products dragged the black liquid to its lowest level since before the US-Iran war. This should alleviate upstream pressure on consumer inflation, forcing traders to scale back their bets on Fed interest rate increases. The resultant decline in US Treasury bond yields caps any further appreciation of the US Dollar (USD), though it does little to provide any respite to the Gold.
According to CME Group’s FedWatch Tool, market participants are still pricing in over an 80% chance that the US central bank will raise borrowing costs by the end of this year, which should help limit any meaningful USD fall. Meanwhile, a global selloff in technology stocks earlier this week continues to weigh on investors’ sentiment and should also support the safe-haven Greenback. This, in turn, backs the case for a further near-term depreciation of the Gold price, suggesting that any attempted recovery could be sold into and remain capped. Moreover, acceptance below the $4,000 psychological mark validates the negative outlook for the precious metal.
XAU/USD 4-hour chart
Gold needs to consolidate before further losses amid oversold conditions
Against the backdrop of the recent repeated failures near the 100-period Simple Moving Average (SMA) on the 4-hour chart, the overnight break below the previous year-to-date low and the $4,000 mark were seen as a fresh trigger for the XAU/USD bears. That said, the Relative Strength Index (14) hovers near oversold territory around 28, suggesting that the pace of the decline could slow. Hence, it will be prudent to wait for some near-term consolidation or a modest bounce before positioning for deeper losses.
Meanwhile, the negative Moving Average Convergence Divergence (MACD) reading below zero and its recent deterioration suggest that any rebounds may struggle while the XAU/USD pair trades well beneath the 100-period SMA near $4,258.00. In the meantime, any meaningful recovery beyond the $4,000 mark might now attract fresh sellers near the $4,065-$4,070 region. This should cap the XAU/USD pair near the $4,100 mark. Bulls would need to clear the said barrier to ease immediate bearish pressure and open the door to a more sustained move higher to the 100-period SMA cap.
(The technical analysis of this story was written with the help of an AI tool.)
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.