Gold eyes $4,300 break as USD sticks to gains amid Fed hike bets, ahead of US CPI

Gold (XAU/USD) struggles to regain ground, hovering near a one-and-a-half-week low, as the US Producer Price Index (PPI) report fuels Federal Reserve interest rate hike expectations, bolstering the US Dollar (USD). Traders hold off on new directional bets until the latest US consumer inflation figures are released. The US Bureau of Labor Statistics (BLS) announced on Thursday that headline PPI rose to 5.4% YoY in August, up from 4.8% the previous month and estimates of 5.3%.

Core PPI, excluding food and energy, also matched expectations and increased by 4.6% YoY, from 4.3% in July. Heightened energy prices and concerns over potential oil supply disruptions due to tensions between the US and Iran add to inflation risks, suggesting the Fed may raise borrowing costs next week. The US Treasury plans to sanction a large bank on Monday as part of its economic pressure campaign against Iran.

Meanwhile, Iran-backed Houthis seized the Red Sea city of Mocha, expanding control over the Bab al-Mandeb Strait, further heightening market worries about oil supply interruptions. US President Donald Trump indicated that the Iran conflict might persist until after the November midterm elections, maintaining geopolitical risk premium and supporting crude oil prices and the safe-haven US Dollar.

A robust US CPI report would push the USD higher, cautioning traders against overcommitting to gold. Despite trading just above the 50% retracement at $4,320 and the 200-day Exponential Moving Average (EMA) at $4,313, gold remains prone to further depreciation, with weekly losses on track. The precious metal trades near the 50% retracement at $4,320 and the 200-day EMA at $4,313, supported by medium-term trend references.

Momentum indicators, however, are softening, with MACD in negative territory and RSI hovering just below 50, indicating a waning bullish impulse. On the upside, resistance is at the 38.2% Fibonacci retracement at $4,409 and the 23.6% retracement at $4,519. Downside support is at the 50% retracement at $4,320, reinforced by the 200-day EMA at $4,313.

A breach below this level would expose the 61.8% retracement at $4,231 and the 78.6% level at $4,104, with the prior cycle low of $3,943 as a distant floor. Haresh Menghani, a detail-oriented professional with over 10 years of experience in global financial markets analysis, provided insights on the USD's strength against major currencies, particularly the Swiss Franc, and analyzed the potential impact of PPI data on the US Dollar.