Gold prices are retreating from three-week highs of $4,149 in Asian trading on Tuesday, as traders lock in profits ahead of the crucial US Consumer Price Index (CPI) report. The pullback is also influenced by a pause in the US Dollar's sell-off, as markets react to recent diplomatic efforts between the United States and Iran. US President Donald Trump stated, "Iran militarily is effectively over. We're just keeping it the status quo," following discussions with Qatar's prime minister. These developments have eased inflation concerns, contributing to the Greenback's correction and supporting Gold's recovery from yearly lows of $3,870.
The upcoming US CPI data release is a key focus for traders, as it will provide critical inflation insights before the Federal Reserve's December 8-9 monetary policy meeting. The headline monthly CPI is expected to rise by 0.3% in October, down from a 0.6% increase in September. Core CPI, excluding volatile items like food and energy, is projected to increase by 0.2%. The absence of annual inflation readings due to last year's government shutdown makes the core inflation numbers particularly important this time.
An upside surprise in the CPI and core CPI prints could reinforce expectations of another December interest rate hike, potentially boosting US Treasury bond yields and the USD, which would weigh on non-yielding Gold. Conversely, softer inflation data could push back against expectations for a final rate hike before year-end, allowing Gold to extend its recovery. The US CPI report will likely determine Gold's next direction, though thinning liquidity ahead of the Veterans Day bond-market holiday could also impact post-CPI trades.
Technically, Gold is trading at $4,115.14, holding a capped bias as it remains below key moving averages despite stabilizing over its 21-day SMA. The immediate trend is still heavy, but the 14-day Relative Strength Index hints at tentative recovery momentum. Resistance levels are noted at $4,185-4,190, with deeper support around $4,067.85 and $3,868.92.