Gold weakens further below $5,200, refreshes daily low as traders await US CPI

Gold struggles to capitalize on its modest intraday gains amid the emergence of some USD buying.
Easing inflation concerns might cap the USD and support the precious metal amid geopolitical risks.
Traders now look to the crucial US CPI report for a fresh impetus amid mixed Fed rate cut signals.

Gold (XAU/USD) extends its steady intraday descent below the $5,200 mark and touches a fresh daily low during the first half of the European session on Wednesday. The US Dollar (USD) attracts some dip-buyers and looks to build on the overnight bounce from a one-week low, undermining the commodity. The USD uptick, however, lacks bullish conviction amid bets that Crude Oil prices are no longer high enough to limit the US Federal Reserve’s (Fed) ability to cut interest rates. This, in turn, could act as a tailwind for the non-yielding yellow metal.

Crude Oil prices retreated sharply following a blowout rally to the highest level since June 2022, touched earlier this week, after US President Donald Trump hinted that the war in the Middle East could end soon. Moreover, the Wall Street Journal reported this Wednesday that the International Energy Agency (IEA) has proposed the largest release of oil reserves in its history in an effort to lower Crude prices amid the US-Israel conflict with Iran. This helps ease concerns about a potential war-driven surge in inflation and keeps hopes alive for further easing by the US central bank, which undermines the USD and supports the Gold price.

Meanwhile, there were no signs of an end to hostilities, with Iran experiencing the most intense US-Israeli bombardments on Tuesday. The Islamic Revolutionary Guard Corps (IRGC), on the other hand, escalated its operations against the US and Israel, and announced the start of targeting the enemy’s technological infrastructure in the region. This keeps geopolitical risks in play, which keeps a lid on any optimism in the markets and turns out to be another factor benefiting the safe-haven Gold. Traders, however, refrain from placing aggressive directional bets and opt to wait for the latest US consumer inflation figures, due later today.

The US Consumer Price Index (CPI) will be looked upon for cues about the Fed’s rate-cut path amid concerns that the closure of the Strait of Hormuz could lead to prolonged disruptions to oil supplies and rekindle inflation. This will be followed by the US Personal Consumption Expenditures (PCE) Price Index on Friday, which will play a key role in influencing the near-term USD price dynamics and provide a fresh impetus to the Gold. Nevertheless, the aforementioned fundamental backdrop seems tilted in favor of bullish traders, suggesting that any corrective slide could be seen as a buying opportunity and is likely to remain limited.