Gold prices (XAU/USD) rose 0.5% during Tuesday’s European trading session, rebounding above the $4,000 threshold to reach approximately $4,020. The movement comes as investors prepare for the release of the United States Consumer Price Index (CPI) data for June, scheduled for 12:30 GMT.
According to FXStreet, the precious metal’s gains are largely supported by a correction in the US Dollar. The US Dollar Index (DXY), which measures the currency against six major peers, traded 0.18% lower at 101.10. A weaker dollar typically makes gold a more attractive investment for holders of other currencies.
Market participants are closely watching the CPI report to gauge the Federal Reserve’s future monetary policy direction. Following the latest Federal Open Market Committee (FOMC) minutes, policymakers have identified high inflation as a primary risk. Analysts expect headline CPI to reach 3.8% year-on-year, down from 4.2% in May, with core figures projected at 2.9%.
Beyond inflation data, geopolitical instability is playing a significant role in market sentiment. Ongoing military tensions between the US and Iran have led to a surge in oil prices, which complicates global inflation expectations. While gold is often sought as a safe-haven asset during times of uncertainty, the potential for central banks to tighten monetary policy in response to energy-driven inflation poses a challenge to non-yielding assets like gold.
Technically, gold maintains a bearish near-term bias as it remains below its 20-day exponential moving average (EMA) of $4,126.07. Analysts suggest that a daily close above this level is required to signal a sustained recovery, while the $3,941.76 June low serves as a critical support level for the metal.