Gold futures are testing key support near $4,402.59 after slipping to $4,428 on the monthly chart, as a hotter-than-expected core inflation reading raises the odds of a Federal Reserve rate hike next week. Energy-led inflation, driven by the Iran conflict's impact on oil supply, is compounding the pressure on the metal.
Gold futures are trading at $4,428, defending immediate support at $4,402.59 after opening the month at $4,498.70 and testing a low of $4,329.20. The metal also sits below the psychological support at $4,444, signaling weakness on the monthly chart.
Inflation data raises hike odds
Overall U.S. consumer prices rose 0.4% month-on-month in August, faster than July's 0.1% pace, while the annual rate held at 3.4%. Core CPI, which strips out food and energy, increased 0.3% month-on-month and eased slightly to 2.4% year-on-year.
Gasoline costs jumped 3.9% versus the prior month and accounted for over a third of the total increase in consumer items, according to the Labor Department's Bureau of Labor Statistics. Following the data, markets were pricing in about an 86% chance of a quarter-point rate increase this month, CME FedWatch showed.
Fed Chair Kevin Warsh has said the central bank may have more work to do to contain U.S. inflation of 3.7%, with policymakers next meeting Sept. 15 and 16. Fed Governor Christopher Waller, however, has indicated he is open to waiting one more meeting before lifting rates again.
Energy shock adds pressure
The odds of a rate hike are being shaped by energy-led inflation tied to an escalating U.S.-Iran conflict, now in its seventh month, which has left the Strait of Hormuz largely shuttered to tanker traffic. Brent crude futures traded above $101 per barrel on Wednesday for the first time since July, while WTI futures surpassed $96 per barrel at session highs.
The European Central Bank raised interest rates Thursday to cool inflation fed by high oil prices, after eurozone inflation came in at 3.3% in August, above its 2% target.
Technical levels to watch
A breakdown below the monthly 9 EMA at $4,351 could push futures toward the 20 EMA at $3,996 if the Fed hikes rates next week. On the weekly chart, gold is trying to hold the 9 EMA and 20 EMA, both near $4,409, after opening the week at $4,466.50; a break below that could test $4,328.90.
The daily chart shows futures at $4,418.81, facing a key support at the 100 EMA of $4,368.97, below which the 50 EMA at $4,310.21 comes into view. A weekly close below current levels could trigger a gap-down opening as speculative positions unwind ahead of the Fed decision.
Source: Investing.com
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