GOLD awaits US CPI inflation for fresh impetus amid US-Iran impasse

• Gold hits three-week highs near $4,775, then retreats early Tuesday on profit-taking.
• The US Dollar Index bounces back on receding hopes for a US-Iran peace deal, with eyes on US CPI data.   
• Gold bulls consolidate after the falling wedge breakout, awaiting a daily close above the $4,775 confluence resistance.

Gold has entered a phase of upside consolidation above the $4,700 level on Tuesday, having reached its highest levels in three weeks at around $4,775 in the early Asian hours. Gold bulls now await the US Consumer Price Index (CPI) data for the next push higher.

The latest leg down in Gold could be attributed to a bout of profit-taking after two back-to-back days of gains and ahead of the critical US inflation release.

Traders resort to repositioning amid receding hopes of a peace deal likely to be reached between the United States (US) and Iran before the highly anticipated meeting between US President and his Chinese counterpart , scheduled later this week.

On the geopolitical front, there are no signs of progress on US-Iran peace talks. Trump said the ceasefire with Iran was “on life support”.

Meanwhile, CNN News reported, citing sources familiar with the discussions, that the US President is seriously weighing resuming combat operations as he is growing increasingly frustrated with how the Iranians are handling talks to end the conflict.

The US-Iran standoff has sent Oil prices back higher; reviving inflation concerns and boosting hawkish expectations about the US Federal Reserve’s (Fed) interest rate outlook. This, in turn, appears to be checking the upside for the non-interest-bearing bright metal.

Hence, all eyes now turn to the US CPI report, which could alter market expectations about the Fed’s next rate moves and decide the next big trend in Gold.

The US annual and monthly core CPI are expected to rise by 2.7% and 0.4% in April. These figures are closely monitored by the Fed as they exclude volatile items like energy and food, while also shielding the war impact on energy prices.

Hotter-than-expected core CPI readings could reinforce hawkish bets surrounding the Fed, lifting the US Dollar at the expense of Gold. On the contrary, Gold could receive the much-needed boost to extend the recent breakout on an unexpected slowdown in US inflation. A softer print could revive Fed rate cut bets for this year, rendering negative for the Greenback.

Daily technical analysis

In the daily chart, XAU/USD trades at $4,730.82. The metal sits just under the 50-day Simple Moving Average (SMA) at $4,757.65 and the 100-day SMA at $4,785.99, leaving the broader tone capped even as it holds above the 21-day SMA at $4,696.77 and the 200-day SMA at $4,328.17. Price action is effectively testing the descending resistance trend line, while the Relative Strength Index (14) near 53 hints at mildly positive but not impulsive momentum, suggesting a consolidative bias rather than a clear directional break.

On the topside, immediate resistance is seen at the 50-day SMA around $4,757.65, followed by the 100-day SMA near $4,785.99, with further upside likely constrained along the extension of the downward resistance trend line. A daily candlestick closing above the confluence zone of resistances around $4,775 is critical to resuming the upside break from the falling wedge pattern, confirmed on May 6.

However, Gold could test bearish committments at higher levels amid a Bear Cross. The 50-day SMA closed below the 100-day SMA on Monday, validating a beairsh crossover and acting as a headwind to the recent rally in Gold.

On the downside, initial support is provided by the nearby pivot area around the latest close and the 21-day SMA at about $4,696.77; a daily close below this short-term average would expose deeper retracement towards the more distant 200-day SMA around $4,328.17.