Gold (XAU/USD) has reversed a three-day losing streak, recovering from a one-week low around $4,340 touched during Asian trading on Wednesday. The bounce is largely attributed to a softer US dollar, which remains under pressure near its weakest level in over two weeks. However, the precious metal’s upside appears limited as markets brace for further central bank tightening and a fresh batch of US inflation data.
Central bank expectations weigh on gold’s outlook
The Bank of Japan’s (BoJ) hawkish stance has boosted the yen, dragging the dollar lower and providing a tailwind for gold. Markets have fully priced in a BoJ rate hike at the September 17–18 meeting. Meanwhile, the European Central Bank (ECB) is widely expected to deliver a 25-basis-point rate increase on Thursday. The Reserve Bank of Australia (RBA) is also considering a rate rise later this month.
On the other side of the Atlantic, the better-than-expected US nonfarm payrolls report has revived bets that the Federal Reserve will raise rates in September. Strategists at BNY note that the jobs data “firmly re‑anchored expectations for further Fed tightening,” adding that a September hike now has a probability above 60%. Governor Christopher Waller’s recent comments, while somewhat equivocal, have not been enough to change that view. Higher interest rates tend to boost the dollar and weigh on non-yielding assets like gold.
Geopolitical tensions add to the mix
Escalating US-Iran tensions are also influencing gold’s path. The US attacked Iranian oil tankers in the Gulf of Oman and near Kharg Island; Iran responded by firing over 30 missiles at US forces at the Al Azraq base in Jordan. Iran’s Islamic Revolutionary Guard Corps has warned that ships in Kuwaiti and Bahraini ports hosting US forces could be targeted. This geopolitical risk has pushed crude oil to a three-month high, fuelling inflation fears that reinforce expectations of Fed tightening. A stronger dollar on the back of such expectations could cap gold’s recovery.
Technical levels to watch
Gold found support at the $4,345–$4,340 confluence zone, which includes the 200-period simple moving average on the four-hour chart and the 50% Fibonacci retracement of the July–August rally. This area is a key pivot. The daily relative strength index (RSI) near 42 and a negative moving average convergence divergence (MACD) suggest the bounce is more a stabilisation above trend support than the start of a sustained bullish move.
Immediate resistance lies at the 38.2% Fibonacci retracement of $4,427. A break above that would expose the 23.6% retracement near $4,529. On the downside, initial support is at the 200-period SMA around $4,352.88, followed by the 50% retracement at $4,344. A decisive drop below this band could open the door to deeper Fibonacci supports at $4,262 and $4,144.
Traders are now waiting for US producer price index (PPI) data on Thursday and consumer price index (CPI) figures on Friday for further clues on the Fed’s policy path. Those releases will likely determine whether gold can extend its recovery or remain capped.
Key takeaways
- Gold snapped a three-day losing streak by rebounding from a one-week low near $4,340.
- A weaker US dollar, pressured by BoJ and ECB expectations, supported the recovery.
- Hawkish Fed bets and US-Iran tensions may limit further gains.
- US inflation data (PPI, CPI) this week will provide direction for the next move.
Common questions
What is the key support level for gold right now?
The $4,345–$4,340 zone, which combines the 200-period SMA on the four-hour chart and the 50% Fibonacci retracement, is acting as the main floor. A break below that could lead to $4,262 and $4,144.
What is the immediate resistance level for gold?
The first resistance is at the 38.2% Fibonacci retracement of $4,427. Above that, the 23.6% retracement near $4,529 becomes the next hurdle.
Gold’s short-term direction hinges on the upcoming inflation figures and central bank decisions. For the latest price, check the live gold price.