Gold (XAU/USD) slipped on Thursday as markets looked past softer-than-expected US CPI and PPI for June and instead tracked renewed Middle East tensions that risk pushing energy prices higher and reviving inflation pressure. XAU/USD traded near $4,015, down 1.10%, after touching $3,974 earlier in the US session. The US Dollar and US Treasury yields rebounded modestly after two days of declines, while Federal Reserve messaging continued to centre on returning inflation to a 2% target and a stabilising labour market, leaving open the prospect of rate rises later this year and weighing on non-yielding bullion.
US Retail Sales increased 0.2% MoM in June, matching expectations, and May was revised to 1.0% from 0.9%; the control group held at 0.5% versus May’s 0.8%. Initial Jobless Claims fell to 208K from 216K, below the 217K forecast. Geopolitical risk rose after a fifth night of US strikes on Iranian targets and reported Iranian responses in Kuwait, Bahrain and Jordan, while Reuters said Iran told Yemen’s Houthis to close Bab el-Mandeb if US attacks hit its power network. WTI traded around $80.00, up nearly 12% this week. Technically, XAU/USD remains below the 200-day SMA at $4,495 and the 100-day SMA at $4,547, with resistance near $4,200 and support at $4,000 and about $3,800; RSI is near 37 and MACD is positive but fading.
Trading Outlook and Strategies
As gold struggles to hold the critical $4,000 psychological level, we recommend derivative traders focus on short-term put options or short futures contracts. With XAU/USD trading around $4,015 and having already dipped to $3,974 today, the immediate path of least resistance points downward. A sustained break below $4,000 could quickly open the door for a slide toward the parallel channel support at $3,800.
We must closely monitor how the bond market reacts to rising energy costs, as the 12% weekly surge in West Texas Intermediate crude to $80.00 threatens to reignite inflation. Even though the latest CPI and PPI cooled, this oil price spike is fueling fears that the Federal Reserve will keep interest rates higher for longer. Historically, rising real yields put severe pressure on non-yielding assets, meaning we should expect any gold rallies to be capped by heavy selling pressure.
Technical Analysis and Risk Management
On the technical side, we see strong overhead resistance clustered around $4,200, which aligns with the upper boundary of the downward parallel channel. Since the price remains well below the 200-day Simple Moving Average at $4,495, the dominant trend remains firmly bearish. We suggest traders use any temporary relief rallies toward $4,150 or $4,200 to establish new short positions rather than buying the dip.
The latest US macroeconomic data, including a solid 0.2% rise in retail sales and jobless claims falling to 208,000, shows the economy remains resilient enough to withstand elevated borrowing costs. This robust labor market gives the Fed ample room to delay rate cuts or even raise rates later this year if geopolitical conflicts in the Middle East escalate. Because of this, we advise employing risk-defined strategies, like bear put spreads, to capitalize on gold’s downward momentum in the coming weeks.
