Gold's rally capped by Fed tightening and Iran tensions; CPI data eyed

FUNDAMENTAL OVERVIEW

Gold surrendered all of the gains from the Treasury buyback announcement after Federal Reserve Chair Warsh tightened financial conditions further through a hawkish address at the Jackson Hole Symposium. Since yesterday, a pullback has emerged across multiple markets as the repricing driven by hawkish sentiment completed its cycle and conditions began to stabilise.

The US CPI report due next Friday remains the critical risk event capable of shaping interest rate expectations and determining gold's near-term trajectory. At present, traders assign a 58% probability to a rate increase in September.

A soft CPI reading is the only scenario that could push those probabilities below 50% and prevent the Fed from raising rates at the upcoming meeting. If the probabilities hold at or above 50%, the Fed may be compelled to hike regardless, since failing to act would convey a dovish signal.

For gold, the upside is constrained at present by Fed tightening risks and the intensifying US-Iran conflict. These two factors will be watched closely.

A de-escalation in the Middle East combined with a dovish repricing of rate expectations — triggered by a soft CPI — would provide positive catalysts and likely push gold to fresh highs. On the other hand, a hot CPI without any de-escalation in the war would probably set off another selloff, potentially dragging gold back below the 4,000 level.

GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME

On the daily chart, gold fell to the key swing low near 4,311, where a bounce occurred as buyers stepped in to position for a rally toward 4,890. Sellers will need a break below 4,311 to clear the path for a move to 3,885.

GOLD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME

On the 4-hour chart, the price is currently close to the key resistance zone around 4,450. Sellers are expected to emerge there with a defined risk above resistance, positioning for a drop back to 4,311. Buyers, however, will want to see the price break higher to increase bullish bets toward the downward trendline.

GOLD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME

On the 1-hour chart, the price is trading within a tight channel, which may signal weakening bullish momentum. Buyers are likely to continue leaning on the lower bound of the channel to push into new highs, while sellers will look for a breakdown to pile in for a drop back to the 4,311 support. The red lines define the average daily range for today.

UPCOMING CATALYSTS

Today features Fed Governor Waller speaking, US Jobless Claims data, and the US ISM Services PMI. The week concludes tomorrow with the US NFP report.