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• `Gold struggles to capitalize on modest Asian session gains to a three-week high.
• Iran tensions and hawkish Fed bets underpin the USD, weighing on the commodity.
• Traders now look to the US inflation figures before positioning for a firm direction.

Gold (XAU/USD) maintains its offered tone below through the early European session on Tuesday and is currently placed around the $4,700 as traders keenly await the release of the US consumer inflation figures.

In the meantime, the incoming negative headlines surrounding the Middle East crisis dampen hopes for a US-Iran peace deal and benefit the US Dollar’s (USD) reserve currency status. Furthermore, a diplomatic setback remains supportive of elevated Crude Oil prices, fueling inflationary concerns and bets for more hawkish central banks, including the US Federal Reserve (Fed). This provides an additional boost to the USD and also contributes to the non-yielding yellow metal’s intraday pullback from a three-week high.

In fact, US President Donald Trump dismissed Iran’s proposal to end a more than two-month-old conflict amid disagreements over Tehran’s nuclear program and a standoff over the critical Strait of Hormuz. Furthermore, CNN reported that Trump has grown impatient with the continued closure of the strategic waterway and also frustrated with how the Iranians are handling negotiations to end hostilities. Adding to this, some Trump aides say that he is now more seriously considering a resumption of major combat operations than he has in recent weeks. This sparks fears of a fresh escalation in the conflict and further benefits the USD, exerting some downward pressure on the Gold price.

Meanwhile, traders are still pricing in around a 25% chance that the US central bank will hike interest rates by the end of this year amid worries that the war-driven surge in energy prices will rekindle inflationary pressures. Hence, the market focus will remain glued to the crucial US Consumer Price Index (CPI), which should influence expectations about the Fed’s policy path and drive the USD demand. Nevertheless, hawkish Fed expectations turn out to be another factor that lends some support to the USD and contributes to the bullion’s intraday pullback from the $4,773-$4,774 region. The lack of follow-through selling, however, warrants caution before placing bearish bets on the Gold price.

XAU/USD 4-hour chart. 

Gold could accelerate the corrective fall once 100-SMA pivotal support on H4 is broken

From a technical perspective, the XAU/USD pair showed some resilience below the 100-period Simple Moving Average (SMA) on the 4-hour chart on Monday. The subsequent rebound from the 38.2% Fibonacci retracement level of the April-May downfall and a breakout through the 61.8% Fibo. level favors bullish traders.

Meanwhile, momentum indicators hint that upside pressure is firm but not yet in a strong trending phase. In fact, the Relative Strength Index (RSI) around 58 suggests moderate bullish momentum, while the Moving Average Convergence Divergence (MACD) histogram is hovering just below zero.

On the topside, immediate resistance is aligned at the 61.8% Fibo. retracement around $4,742, with further hurdles at the 78.6% level near $4,807 and the recent swing high at $4,890. On the downside, initial support is seen at the 50.0% retracement near $4,696, followed by the 100-period SMA around $4,671 and the 38.2% retracement at approximately $4,651. A deeper setback would expose the 23.6% retracement near $4,594 and the structural floor around $4,503.

• Gold keeps the red below $4,700 as USD extends gains ahead of US PPI
• British Pound: Political risk premium builds .
• Gold remains depressed near $4,700 on firmer USD; looks to US CPI for fresh impetus
• British Pound fills weekly bearish gap vs weaker JPY; GBP/JPY steadies below mid-213.00s
• Gold slides to $4,650 as USD benefits from Iran tensions and Fed hike bets