Will US CPI inflation revive XAU/USD uptrend?

• Gold consolidates near weekly low after testing $4,300 early Friday, as US CPI report looms.
• US Dollar preserves PPI inflation-led gains amid widening Middle East conflict and higher oil prices.
• Gold broke the previous range to the downside, as RSI flips bearish.

Gold is hanging close to one-week lows near $4,310 early Friday, nursing heavy losses after the US Producer Price Index (PPI) data release and the recent upsurge in Oil prices.

Gold is looking to recover a part of the previous heavy losses as traders resort to repositioning ahead of the all-important US Consumer Price Index (CPI) inflation report.

The CPI data is the last major final inflation release before the Federal Reserve’s (Fed) September 15-16 monetary policy meeting, making it one of the most defining data points for deciding whether the Fed opts for an interest-rate hike or keeps rates unchanged.

Markets ramped up their bets on a September rate hike to 72% after a hot US PPI reading, from roughly 60% seen pre-data, according to the CME Group’s FedWatch Tool.

The PPI rose 0.4% last month after an upwardly revised 0.1% gain ​in July.  In the ​12 months through August, the PPI advanced 5.4% after rising 4.8% in July.

That gave a strong lift to the US Dollar (USD) across the board, further helped by surging US Treasury bond yields on rising inflation expectations, weighing negatively on the non-yielding Gold.

Inflation concerns were aggravated as Oil prices topped $100 for the first time in nearly four months amid widening Middle East conflict.

Iran-backed Houthis seized control of Yemen's port city of Mocha on Thursday and advanced down the Red Sea coast to strategic islands, BBC News reported, citing military sources.

At the same time, traffic in Hormuz remained restricted, while US officials cited by the Wall Street Journal (WSJ) revealed that Iran has ramped up its ballistic missile production again.

Gold’s next major move now depends on US CPI data, with all eyes on core readings as they present a real picture to the Fed, shielding from the war-driven impact on energy prices.

Annual core CPI is seen rising by 2.4% in August, slowing slightly from a 2.5% increase in July. Over the month, core CPI inflation is expected to steady at 0.2% in the same period.

An upside surprise in core prints could reinforce the Fed’s hawkish expectations, confirming a rate hike next week. That could strengthen the USD and Treasury bond yields, sending Gold sharply lower.

On the other hand, softer-than-expected core CPI data could prompt markets to scale back their September Fed rate hike bets, reviving buying interest in the bullion at the expense of the buck.

According to TD Securities, precious metals are effectively “wait[ing] on inflation data,” with the upcoming US release framed as “the next big catalyst.” The bank argues that “an upside surprise would embolden Fed pricing and weigh on the yellow metal,” whereas “less worrisome inflation could ultimately be the first catalyst to see the next wave of discretionary positioning start to enter the market.” At the same time, TD Securities stresses that the broader backdrop remains constructive, noting that “with the precious metal landscape still broadly supported by the renewed Dollar-debasement theme, elevated central bank buying and renewed ETF accumulation, a hawkish Fed may only postpone the timing of the next leg higher rather than catalyze material downside.”

In the daily chart, XAU/USD trades at $4,320.40, maintaining a cautious bearish tone as it sits between the clustered overhead moving averages and the closer 50-day simple moving average (SMA) below price. Spot gold holds above the 50-day SMA at $4,268.52, which offers initial trend support, but it remains capped beneath the 100-day SMA at $4,335.42 with the 21-day and 200-day SMAs higher still, suggesting rallies are vulnerable while this structure holds. The Relative Strength Index (14) around 45 hints at fading bullish momentum and aligns with the idea of a consolidative-to-soft bias rather than an impulsive recovery.

On the topside, immediate resistance is seen at the 100-day SMA near $4,335.42; a daily close above this barrier would open the way toward the 21-day SMA at $4,457.52, with the longer-term cap at the 200-day SMA around $4,538.45. On the downside, the 50-day SMA at $4,268.52 is the key support level to watch; a break below this floor on closing prices would likely reinforce downside pressure and expose deeper corrective potential toward prior swing areas not captured by the current moving-average set.