Gold traded lower on Tuesday, extending its losing streak as higher oil prices and simmering US-Iran tensions shifted the market narrative away from last week’s strong jobs data. The precious metal lost more than 0.44%, changing hands near $4,393 per troy ounce, while investors braced for a busy week of US inflation releases.
Oil shock and geopolitics weigh on gold
Energy prices continued to climb after attacks in the Middle East pushed West Texas Intermediate crude up 1% to $92.10 a barrel. The US-Iran conflict remains a dominant theme, adding a layer of geopolitical uncertainty that typically supports gold. However, the simultaneous rise in oil prices has complicated the outlook: higher energy costs feed into inflation expectations, which in turn strengthen the case for tighter monetary policy.
With the US economic calendar light on Tuesday and Wednesday, attention has turned squarely to the inflation figures due later in the week. The Producer Price Index (PPI) is scheduled for Thursday, followed by the Consumer Price Index (CPI) on Friday.
Inflation data and Fed rate hike expectations
The market is now pricing in a 63% probability of a 25-basis-point rate hike at the Federal Reserve’s next meeting, according to data from Prime Terminal. That expectation was reinforced by last week’s stronger-than-expected Nonfarm Payrolls report, which gave the Fed headroom to continue tightening.
Economists expect July’s CPI to come in at 0.4% month-on-month and 3.4% year-on-year, with core CPI seen at 0.2% month-on-month and 2.4% year-on-year. If the actual numbers exceed those forecasts, it would open the door for further rate increases, which typically weigh on gold. The metal tends to fare well in a low-interest-rate environment because it offers no yield, so higher rates make competing assets like bonds more attractive.
Traders will also watch Thursday’s initial jobless claims for the week ending September 5 to assess the health of the labour market.
Technical outlook: support levels in focus
Gold has fallen for three consecutive sessions and is now approaching the 100-day Simple Moving Average (SMA) at $4,346. The Relative Strength Index (RSI) has turned lower after crossing below the 50-neutral level, signalling further downside potential in the near term.
The first key support is at $4,300. A decisive break below that level could expose the September 2 swing low at $4,282, followed by the 50-day SMA at $4,254. Further weakness would bring the $4,200 area into play.
On the upside, a move back above $4,400 would open the way to the psychological $4,450 level and then $4,500. Beyond that, the 200-day SMA at $4,535 becomes the next target, with $4,600 and the August 25 daily high of $4,697 further ahead.
For the latest price action, check the live gold price.
Key takeaways
- Gold fell more than 0.44% on Tuesday to around $4,393, extending its losing streak to three days.
- Rising oil prices (WTI at $92.10) and US-Iran tensions are dominating market attention alongside upcoming US inflation data.
- Markets see a 63% chance of a 25-basis-point Fed rate hike next week; higher rates are negative for gold.
- Technical support lies at $4,300, with further downside to $4,282 and $4,254 if broken. Upside resistance starts at $4,400.
Common questions
Why does gold price fall when interest rates rise?
Gold is a yield-less asset. When the Federal Reserve raises interest rates, bonds and other yield-bearing assets become more attractive relative to gold, often prompting investors to sell the metal. A higher rate environment also strengthens the US dollar, which tends to push gold prices lower because gold is priced in dollars.
How does oil price affect gold?
Higher oil prices can boost inflation expectations, which may lead central banks to tighten monetary policy. That dynamic can weigh on gold. At the same time, oil-driven geopolitical tensions can support gold as a safe haven, creating a mixed effect.
What is the 100-day moving average in gold trading?
The 100-day Simple Moving Average (SMA) is a widely watched technical indicator that averages the closing price over the past 100 trading days. It serves as a potential support or resistance level. Gold is currently approaching its 100-day SMA near $4,346, which traders view as a key level.
Gold’s recent decline reflects a market caught between geopolitical risk and the prospect of higher US interest rates. This week’s inflation data will likely determine the next leg for the precious metal, with a hot CPI reading potentially accelerating the sell-off and a cooler print offering a reprieve.