Gold remains depressed below $4,650 on firmer USD; looks to US PCE for Fed rate outlook

• Gold is seen consolidating in a range as bulls keenly await the release of the US PCE data.
• Fading Fed hike bets and sliding US bond yields weigh on the USD, supporting the bullion.
• The bullish technical setup suggests that the path of least resistance remains to the upside.

Gold (XAU/USD) sticks to modest losses below $4,650 heading into the European session on Wednesday, though it lacks bearish conviction and remains confined within the previous day’s broader range. The US Dollar (USD) regains positive traction amid some repositioning ahead of the US Personal Consumption Expenditures (PCE) Price Index and is seen as weighing on the commodity. Adding to this, Federal Reserve (Fed) Chair Kevin Warsh’s remarks at the Jackson Hole Symposium on Friday might offer more cues about the interest rate path. The outlook, in turn, will drive the USD and the non-yielding yellow metal.

In the meantime, expectations have shifted toward a policy hold at the upcoming September 15–16 FOMC meeting in the wake of cooling price pressures and a sluggish labor market. Moreover, the US Treasury’s buyback strategy leads to a further decline in US bond yields. Meanwhile, two senior officials indicated that the Treasury could use its near $1 trillion General Account to fund its recently announced plans to increase buybacks of longer-term bonds. Furthermore, positive developments surrounding the Middle East crisis weigh on crude oil prices, easing inflation fears and exerting additional pressure on US bond yields. This, in turn, might cap gains for the USD and acts as a tailwind for the Gold price.

Crude oil prices dropped to a nearly two-week low after Iran said that it had restarted talks with Oman to manage commercial shipping traffic through the Strait of Hormuz. The countries said they had discussed a joint temporary navigational corridor through the strategic waterway. Adding to this, the US offered Iran sanctions relief and an end to the naval blockade in exchange for reopening the Strait and halting attacks carried out by its regional proxies. This revived hopes for a diplomatic resolution to end the US-Iran war, which could further dent the Greenback’s reserve currency status and support the Gold price. Hence, strong follow-through selling is needed to confirm a near-term top for the XAU/USD pair.

XAU/USD daily chart

Technical Analysis

The recent breakout through the $4,500 psychological mark confluence hurdle – comprising the 200-day Simple Moving Average (SMA) and the 38.2% Fibonacci retracement level of the March-June decline – was seen as a key trigger for XAU/USD bulls. The subsequent move up, however, struggles to find acceptance above the 50% retracement level, warranting some caution before positioning for any further gains.

Meanwhile, the Relative Strength Index (14) near 72 signals overbought conditions and hints that upside momentum, although strong, could be vulnerable to consolidation. The Moving Average Convergence Divergence (MACD) indicator (12, 26, 9) stays in positive territory, reinforcing the constructive tone despite stretched momentum. Nevertheless, XAU/USD bulls might still wait for a move above $4,700.

A sustained break above the said handle would open the way toward the 61.8% level at $4,856, the 78.6% retracement at $5,104, and the cycle high area around $5,421. On the downside, initial support is seen at the 200-day SMA at $4,522 and the nearby 38.2% Fibo. retracement at $4,508, with deeper pullbacks likely targeting the 23.6% retracement at $4,292 and the structural floor anchored near $3,944.

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