Gold (XAU/USD) has maintained moderate intraday losses throughout the first half of Wednesday’s European session and is currently trading near the lower end of the daily range around the $4,025 region, down 0.85% on the day. Despite frail consumer price index (CPI) and producer price index (PPI) reports, elevated oil prices maintain the possibility of a U.S. Federal Reserve (Fed) interest rate hike later this year. This, in turn, provides some support for the US dollar (USD) and causes an outflow from unprofitable gold.

The U.S. Bureau of Labor Statistics (BLS) reported Wednesday that the PPI unexpectedly fell 0.3% in June, following a downwardly revised 0.6% raise in the previous month. Moreover, the annual rate dropped from 6% in May to 5.5% last month. This is on top of the sharpest month-on-month decline in the US CPI since April 2020 and indicates easing price pressures. Traders responded by tempering their expectations for an immediate interest rate hike by the Fed, which pushed the dollar to its lowest level since June 18 and provided some support for the gold price on Wednesday.

However, the risk of energy-led inflation remains as oil prices remain steady near a one-month high amid escalating U.S.-Iran tensions and supply disruptions in the Strait of Hormuz. In fact, the United States carried out another round of airstrikes on Iran on Wednesday, targeting coastal defense systems and missile infrastructure. Iran responded with retaliatory drone and missile attacks on U.S.-linked military facilities throughout the region. Additionally, US President Donald Trump warned that critical Iranian infrastructure could be targeted if the situation continues to deteriorate.

Moreover, Iran’s Islamic Revolutionary Guard Corps has threatened to expand the conflict by targeting additional regional energy supply routes. This suggests Iran could employ its Houthi allies in Yemen to threaten shipping through the Bab el-Mandeb Strait. This continues to support oil prices, revive inflation concerns and argues for at least one 25 basis point (bps) Fed rate hike in 2026. This, in turn, could keep dollar bears from making aggressive bets and suggest that the path of least resistance for the gold price remains down.

XAU/USD daily chart

Gold may fall below $4,000 and retest weekly lows

The XAU/USD pair maintains a short-term bearish bias below the 200-day plain moving average (SMA) and within a broader parallel bearish channel. However, mixed momentum indicators – a moderately positive moving average convergence divergence (MACD) around 9.43 and a relative strength index (RSI) around 40.77 – only point to initial stabilization rather than a sustained recovery.

That said, a sustained break and acceptance below the psychological $4,000 mark would expose the year-to-date low near the $3,943-$3,942 region reached in June. A subsequent decline could deepen and bring the gold price to key structural support near $3,675.71, representing the lower band of the channel. A decisive break below this level would reinforce the dominant bearish tone.

Upside, initial resistance appears at the upper boundary of the descending channel near $4,093.63, where any recovery is likely to be met with selling pressure. A sustained break above this area would expose the 200-day SMA as the next significant barrier near $4,495.94.

(The technical analysis for this story was written with the support of an AI tool. Find out more.)