Gold Price Forecast: XAU/USD hits lows sub-$4,600 as US inflation supports the Greenback

Gold (XAU/USD) dipped below $4,600 during the European morning, as the US Dollar Index (DXY) stabilized above 99.00. Market sentiment remained cautious due to upcoming Jackson Hole symposium and high US inflation figures from Wednesday. The Personal Consumption Expenditures (PCE) Price Index remained above the 2% Fed target, suggesting a need for increased monetary policy tightening.

Despite this, bets for a September rate hike remained at 36%, according to the CME Group's FedWatch Tool. XAU/USD currently trades at $4,595, after failing to break past the $4.700 level earlier in the week. The near-term trend is still bullish above the 200-day Simple Moving Average (SMA). Momentum indicators are positive, with the Relative Strength Index (14) at 66 and the MACD indicator above zero, indicating moderating bullish momentum.

Immediate support can be found at Wednesday's low of $4,583, just above the 200-day SMA of $4,525. A break below this level might reignite bearish sentiment, potentially exposing lower lows around $4,450 and $4,310. On the upside, resistance is at Tuesday's high of $4,700 and the May 12 high of $4,775. Gold has historically served as a store of value and medium of exchange, often acting as a safe-haven asset during turbulent times.

Central banks tend to diversify their reserves with Gold during such periods, signaling confidence in their economies and currencies. Gold's price is inversely correlated with the US Dollar and US Treasuries, while positively correlated with risk assets. Geopolitical instability or fears of a deep recession can trigger significant Gold price increases due to its safe-haven status.

As a yield-less asset, Gold tends to rise when interest rates are low, while higher borrowing costs usually depress its price. The US Dollar's behavior is the primary driver of Gold's price, with a strong Dollar generally supporting lower Gold prices and a weaker Dollar potentially pushing Gold prices higher.