Article by: ETO Markets

Gold prices (XAU/USD) fell after the release of the U.S. consumer Price Index (CPI) report, but attracted bargain hunters after hitting the psychological $2,500 level. As expectations of a Fed rate cut of 50 basis points in September faded, the market adjusted its expectations for Fed policy, driving up Treasury yields and the dollar, which weighed on non-yielding gold. However, the prospect of the Fed starting an easing cycle remains supportive of gold prices, limiting their downside. The market is now focused on the release of the US producer price index (PPI), although reaction is expected to be limited now that the Fed's policy path is clearer.

From a technical point of view, gold prices have recently been range-bound, forming a short-term rectangular shape, indicating that prices are in a consolidation phase after the June rally. On the upside, gold needs to break through resistance in the $…-… area to resume its previous uptrend. A break through this area could provide fresh momentum for bulls to push gold prices higher. On the downside, initial support below the $… mark is at $…, with further support at $…. A break below these support levels could trigger a technical sell-off and bring prices down to the $…-… region near the 50-day simple moving average and possibly even test levels below $….