Gold (XAU/USD) stabilized above its lowest level since November 2025, after fading a modest bounce to the $4,118 region during the Asian session. The precious metal's downside was cushioned by a softer Core US Consumer Price Index (CPI), which eased concerns about runaway inflation and weighed on the US Dollar (USD), prompting some intraday short-covering in gold. The US Labour Department reported that the core CPI cooled to 0.2% in May from 0.4% in April, with the yearly rate at 2.9%, matching expectations. However, the headline CPI accelerated to 4.2% year-over-year, the highest in three years, driven by a 23.5% surge in energy costs [1].
Geopolitical tensions also played a significant role, as Iran announced the closure of the Strait of Hormuz following a new wave of US strikes ordered by President Donald Trump. Iran's military command warned of a 'crushing and decisive' response to any US aggression, which supported crude oil prices and fueled inflationary concerns. This backdrop, combined with hawkish expectations for the US Federal Reserve (Fed), bolstered the USD and capped gold's upside. Traders are currently pricing in a 70% chance of a Fed rate hike this year [1].
The technical outlook for gold remains bearish, with the price having broken below the 200-day Simple Moving Average (SMA) and staying within a downward-sloping channel. The Moving Average Convergence Divergence (MACD) indicator is deeply negative, reinforcing the bearish tone, though the Relative Strength Index (RSI) is in oversold territory, suggesting the pace of decline may moderate. Market participants are now awaiting the US Producer Price Index (PPI) data for further clues on the Fed's policy stance, while ongoing Middle East developments are expected to continue driving volatility in gold and USD price dynamics [1].
CONCLUSION
Gold remains under pressure despite a softer US CPI, as hawkish Fed expectations and escalating US-Iran tensions support the USD and limit gold's recovery. Technical indicators point to a bearish outlook, though oversold conditions may slow further declines. Upcoming US PPI data and geopolitical developments are likely to influence gold's near-term direction.