Gold (XAU/USD) traded slightly lower on Wednesday, remaining above the $4,000 mark, as price action stayed within Tuesday’s range and the market searched for clear direction [1]. The precious metal's movement was influenced by a combination of easing US inflation and heightened geopolitical risks. US Consumer Price Index (CPI) data released on Tuesday showed that annual inflation slowed to 3.5% in June from 4.2% in May, significantly below the market consensus of 3.8%. Monthly inflation contracted by 0.4%, marking the largest decline in nearly six years [1]. This data led to a notable repricing of Federal Reserve rate hike expectations and weakened the US Dollar across the board [1].
Despite the softer US inflation and weaker dollar, gold failed to capitalize on these supportive factors due to escalating tensions between the US and Iran. The threat of further attacks and potential closure of energy routes have driven oil prices to near one-month highs, fueling expectations of renewed inflationary pressures and possible global monetary tightening [1].
From a technical perspective, XAU/USD traded at $4,027, remaining below a key downward trend-line. The Relative Strength Index (RSI) on the daily chart showed a bullish divergence, reaching the neutral 40 area, while the Moving Average Convergence Divergence (MACD) stayed in positive territory but at levels indicating that bullish momentum is still weak [1]. For gold bulls to confirm a trend shift, a break above the trendline around $4,100 and the July 7 high near $4,200 would be necessary. On the downside, support is clustered between Thursday's low in the $4,020 area and the late October 2025 lows near $3,885 [1].
CONCLUSION
Gold prices are currently caught between supportive macroeconomic data and offsetting geopolitical risks. While softer US inflation and a weaker dollar would typically benefit gold, ongoing tensions in the Middle East and high oil prices are limiting gains. The market remains cautious, awaiting a decisive move above key technical levels to signal a clearer trend.