Gold (XAU/USD) is posting moderate losses during the first half of Wednesday's European session and is currently trading near the lower boundary of its intraday range, around $4,025, down approximately 0.85% on the day. Despite weaker-than-expected U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) data, persistently elevated oil prices continue to support expectations that the Federal Reserve will maintain a tighter monetary policy through the end of the year. This, in turn, provides support for the U.S. dollar and encourages capital flows away from the precious metal and into the dollar.

According to data released on Wednesday by the U.S. Bureau of Labor Statistics (BLS), consumer prices unexpectedly declined by 0.3% in June after a downwardly revised 0.6% increase in the previous month. On an annual basis, inflation also eased, slowing from 6.0% in May to 5.5% in June. This marks the sharpest monthly decline in the CPI since April 2020 and signals easing inflationary pressures. Against this backdrop, market participants scaled back expectations for an imminent Fed rate hike, pushing the U.S. dollar down to its lowest level since June 18 and providing some support for gold prices.

Nevertheless, inflation risks linked to energy prices remain elevated, as oil continues to trade near monthly highs amid rising geopolitical tensions between the United States and Iran, as well as supply disruptions through the Strait of Hormuz.

Reports indicate that the United States launched new airstrikes on Iran's coastal defense and missile infrastructure on Wednesday. In response, Tehran carried out drone and missile attacks against U.S.-linked military facilities in the region. Additional pressure on the geopolitical situation came from U.S. President Donald Trump's statement that strikes on Iran's critical infrastructure remain possible should the conflict escalate further. Meanwhile, the Islamic Revolutionary Guard Corps (IRGC) warned that it is prepared to broaden the conflict, including by targeting additional energy supply routes.

This increases the likelihood of greater involvement by Iran-backed forces, including the Houthis in Yemen, posing a potential threat to shipping through the Bab el-Mandeb Strait. As a result, oil prices remain supported, reinforcing inflation expectations and strengthening the case for at least one additional 25-basis-point Fed rate hike in 2026. Consequently, this could limit downside pressure on the U.S. dollar and suggests that the bearish scenario for gold is likely to prevail in the near term.

From a technical perspective, XAU/USD remains under pressure below its 20-day Simple Moving Average (SMA). At the same time, momentum oscillators remain in negative territory, confirming that sellers retain control of the market. If the price fails to hold above the key $4,000 level, the decline may extend toward the yearly low near $3,940. On the other hand, the first resistance is provided by the 20-day SMA. A decisive break and consolidation above this area would open the way toward the next significant resistance levels, represented by the 200-day Exponential Moving Average (EMA) and the 200-day SMA.