Gold edges higher as Hormuz delays, US CPI keep traders cautious

Gold prices ticked higher at the start of the week as Iran's demands on the reopening of the Strait of Hormuz caused delays, and the US CPI showed moderate strength. The XAU/USD pair traded at $4,352, up 0.50%, after bouncing from daily lows of $4,316. The US Dollar Index climbed 0.14% to 99.75, reflecting the impact of US and Japanese interventions in FX markets.

In previous weeks, weaker-than-expected Nonfarm Payrolls data revealed a sluggish jobs market, prompting traders to monitor US inflation figures. The July Consumer Price Index (CPI) is anticipated to fall from 3.5% to 3.4% YoY, while the Core CPI is expected to decline from 2.6% to 2.5% YoY. Upcoming data on Thursday will include the Producer Price Index and Initial Jobless Claims.

Traders are closely watching these figures for signs of weakness in the labor market that could hinder the Fed from cutting interest rates, even though inflation remains high. Geopolitical tensions, particularly concerning Iran's demands for an end to hostilities and the lifting of sanctions, have also influenced oil prices, which surged nearly 6% to $81.54 per barrel.

Gold's price has risen but remains below the 100-day Simple Moving Average, while the Relative Strength Index indicates further upside potential. Clearing the 100-day SMA could propel gold toward the $4,400 psychological level, with the 200-day SMA at $4,498 and the $4,500 milestone as targets. On the downside, the July 6 high at $4,202 serves as initial support; failure to hold this level would open the door to the 50-day SMA and $4,100.

Gold has long been regarded as a store of value, a medium of exchange, a safe-haven asset, and a hedge against inflation and currency depreciation. Central banks are the primary buyers of gold, often increasing their reserves to bolster their currencies during turbulent times.