Gold Stumbles as Stronger Dollar and Rising Inflation Bets Weigh on Prices
Gold prices are struggling to recover from their lowest level in over a week as the US Dollar (USD) remains firm due to rising Federal Reserve interest rate hike bets. The latest US Producer Price Index (PPI) report showed inflation accelerating to a 5.4% year-over-year rate in August, surpassing estimates of 5.3%. This has reinforced expectations that the Fed will raise borrowing costs next week.
The strong USD is also benefiting from geopolitical risks, with tensions between the US and Iran escalating further. Crude oil prices have surged to their highest level since May 21 due to concerns about a prolonged disruption to oil supplies. The safe-haven dollar is expected to gain even more if the upcoming US Consumer Price Index (CPI) report shows a strong inflation reading.
From a technical perspective, gold remains supported by key medium-term trend references, including the 50% retracement at $4,320 and the 200-day Exponential Moving Average (EMA) at $4,313. However, momentum indicators are softening, hinting at a waning bullish impulse rather than an outright reversal.
Initial resistance for gold is seen at the 38.2% Fibonacci retracement at $4,409, followed by a stronger barrier at the 23.6% retracement of $4,519. A break below the current support level would expose the 61.8% retracement at $4,231 and then the 78.6% level at $4,104.