Gold Steady, Dollar Slips on Softer Inflation

Key Takeaways:

*U.S. Dollar extends losses as softer July CPI reinforces September Fed rate cut expectations.

*Political pressure on the Fed and rising fiscal concerns weigh further on greenback sentiment.

*Gold holds in consolidation as dollar weakness offsets improved risk appetite from U.S.–China tariff pause.

Market Summary:

The U.S. Dollar Index continued to trend lower after July CPI data came in softer than expected, with headline inflation easing to 2.7% versus the 2.8% forecast. Core CPI edged higher to 3.1% year-on-year, the fastest pace since February, but markets viewed the increase as insufficient to derail expectations of a September rate cut. Futures pricing now reflects over a 90% probability of easing, with traders interpreting the softer print as confirmation that tariff-related inflation remains modest despite isolated price gains in consumer goods categories such as footwear and household furnishings.

Political risks are compounding the downward pressure on the greenback. President Trump has intensified his attacks on the Federal Reserve, threatening legal action against Chair Jerome Powell over alleged spending mismanagement and publicly demanding immediate rate cuts. The heightened political interference has raised investor concerns about the Fed’s policy independence, with some analysts warning that prolonged pressure could damage global confidence in the dollar. Meanwhile, slowing U.S. growth, rising Treasury yields, and mounting public debt have added a layer of fiscal vulnerability, particularly as a weaker currency increases the cost of servicing foreign-held obligations.

Gold prices have drawn support from the softer dollar, but gains have been restrained by improving global risk sentiment following the extension of the U.S.–China tariff pause for another 90 days. Fed easing expectations provide a bullish backdrop for bullion, yet investor appetite for equities and other risk assets has limited safe-haven flows, keeping gold locked in a narrow consolidation range. Traders are awaiting clearer directional cues from Fed Chair Powell’s Jackson Hole speech on August 21 and the core PCE inflation report at month-end. A distinctly dovish tone could push bullion higher, while a balanced or cautious policy stance may keep both gold and the dollar trading sideways in the near term.

Technical Analysis 

DXY, H4: 

The U.S. Dollar Index (DXY) is holding just above the 97.75 support level, currently trading near 98.00 after retreating from a recent rejection at the 98.60 resistance zone. Price action has been consolidating below the 50-period and 200-period moving averages, with the latter near 98.50 continuing to cap upside attempts. The inability to reclaim these key averages keeps the near-term bias cautious, while 97.75 remains a critical pivot for bulls to defend in order to prevent deeper losses toward 97.10.

Momentum indicators lean slightly bearish. The Relative Strength Index (RSI) sits at 38, edging lower toward oversold territory, suggesting downside pressure remains but also hinting at possible short-term stabilization if selling eases. Meanwhile, the MACD is in negative territory with a flat histogram, signaling a lack of strong directional momentum but maintaining a slight bearish tilt.

Resistance Levels: 98.60, 99.25

Support Levels: 97.75, 97.10

XAUUSD, H4: 

Gold (XAU/USD) is trading just above the 3,350 level after bouncing from the 3,320 support zone, but remains capped by resistance at 3,362, where both the 50-period and 200-period moving averages are converging. This confluence is acting as a significant barrier to upside momentum, keeping price action in a consolidation phase between 3,320 and 3,365. A break from this range is likely to dictate the next directional move, with the broader trend leaning cautious following the recent pullback from 3,400.

Momentum indicators are showing mixed signals. The Relative Strength Index (RSI) sits at 44, hovering below the neutral 50 mark, suggesting a lack of bullish conviction while still avoiding oversold territory. Meanwhile, the MACD remains in negative territory, with its histogram flatlining, indicating that bearish momentum has slowed but no clear reversal signal has emerged.

A decisive close above 3,365 could open the door for a retest of 3,400 and potentially 3,435 if bullish momentum strengthens. On the downside, losing 3,320 would expose the 3,280 support. Until price escapes its current range, traders may expect choppy, range-bound conditions.

Resistance Levels: 3362.25, 3400.00

Support Levels: 3320.00, 3280.00