Gold prices remained under pressure during Tuesday's Asian trading session, with spot gold (XAU/USD) dipping near the $4000 per ounce level, consolidating weakly after a series of declines. Despite persistently high geopolitical risks in the Middle East, growing market expectations that the US will maintain high interest rates for an extended period have somewhat dampened safe-haven buying interest in the precious metal.
The recent announcement by former US President Trump to reinstate maritime blockades against Iranian-related vessels and impose a 20% compensatory fee on all commercial cargo transiting the Strait of Hormuz has escalated tensions. Trump also indicated that the US would continue military actions against Iran, emphasizing that high-intensity strikes would persist in the coming days. As US-Iran tensions intensify further, risks to global energy transportation are rising. Market participants widely believe that if the US strengthens restrictions on Iranian ports and vessels, Iran may increase its interference with shipping through the Strait of Hormuz. This strait handles approximately 20% of the world's seaborne crude oil shipments. Any sustained disruption to transport could push international energy prices higher, potentially fueling global inflation.
For the gold market, geopolitical risks typically boost safe-haven demand. However, the current market focus is more on the potential for rising energy prices to re-ignite inflation, which could force the Federal Reserve to maintain restrictive monetary policy for longer. Since gold itself does not yield interest, the opportunity cost of holding it increases when markets expect rates to stay elevated, weakening the incentive for capital allocation into gold. Consequently, the price has not fully benefited from the rise in risk aversion.
On another front, investors are awaiting the release of the US Consumer Price Index (CPI) data for June, which will be a key factor influencing gold's short-term direction. Market forecasts anticipate the headline CPI month-over-month rate to be around -0.1%, with the core CPI expected to grow by 0.3%. If the inflation figures come in below market expectations, it could further weaken the US dollar and bolster expectations for future monetary policy adjustments, providing temporary support for gold. Conversely, strong inflation data could reinforce expectations that the Fed will maintain its high-rate policy, keeping downward pressure on gold.
Additionally, the market will closely monitor congressional testimony from Federal Reserve Chair Kevin Warsh scheduled for the day. Investors hope to glean fresh insights on the future interest rate path, the inflation outlook, and economic prospects from his remarks. If the testimony continues to signal caution, the US dollar and Treasury yields could remain elevated, weighing on gold. If the tone is more dovish than expected, it could alleviate some of the policy pressure on the metal.
From a technical perspective, the daily chart for spot gold shows the price is still in a corrective phase. After breaking below the key $4000 level, the overall trend has weakened. The MACD indicator maintains a bearish crossover with the green histogram expanding, suggesting bearish momentum remains dominant. The RSI has retreated to a neutral-to-weak zone, reflecting diminished buying power. If the price remains under pressure, initial support is seen near $3975, with further support around the $3940 region. A sustained recovery above $4000 could see the price test resistance near $4025 and $4050. However, the market may maintain a cautious stance ahead of the crucial data release. On the 4-hour chart, gold remains within a descending channel with its price center of gravity continuously shifting lower. The MACD maintains a bearish crossover, but the expansion pace of the green histogram has slowed, indicating that while the short-term downtrend persists, bearish momentum has slightly weakened compared to before. The RSI is hovering around 40, reflecting continued cautious sentiment. If the US CPI data disappoints expectations, gold could stage a technical rebound aided by a weaker dollar, challenging the $4025 resistance area. If inflation data exceeds forecasts, the price may test the $3975 or even $3940 support zones, with short-term volatility expected to increase significantly.
The gold market is currently influenced by two opposing forces: geopolitical risk and monetary policy expectations. Although the escalation in the Middle East has increased safe-haven demand, the market is more focused on the potential for rising energy prices to rekindle inflation, which could prompt the Fed to maintain its high-rate stance, keeping short-term pressure on gold. The US June CPI data and Fed Chair Kevin Warsh's testimony will serve as crucial catalysts for determining the market's direction. If inflationary pressures ease significantly, gold could see a temporary rebound. If inflation proves stubborn, the US dollar and Treasury yields may maintain their strength, posing further downside risks for gold. In the near term, investors should focus on inflation data, US dollar movements, and developments in the Middle East situation, as these will continue to impact market risk appetite.
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