XAU/USD remains range-locked ahead of US inflation test

• Gold prices are back in the red early Tuesday, but remain in a familiar range near $2,500.
• The US dollar maintains its rally amid rising US Treasury yields and sour sentiment.
• How long can gold buyers defend their 21-day SMA at $2,499? The daily RSI remains bullish for now.

The price of gold is trading on a slippery slope, struggling with $2,500 so far in Tuesday’s trading. Despite a minor pullback, the price of gold is holding on to its recent range, with traders refraining from placing new bets on the shiny metal ahead of the critical US Consumer Price Index (CPI) data due on Wednesday.

The price of gold is struggling amid weakened bets of a huge Fed rate cut

The price of gold is challenging the critical near-term daily support level, now at $2,499, again amid a modest rise in US Treasury yields and sustained US dollar strength. The return of risk-off flows to Asia, amid looming concerns about a Chinese economic slowdown, is keeping safe-haven demand for the US dollar buoyed even as markets cut bets on a 50 basis point (bps) interest rate cut ) by the US. Federal Reserve (Fed) next week.

A lackluster US jobs report failed to convince markets of a huge interest rate cut by the world’s most powerful central bank this month, amid lingering fears of a US “hard landing”.

Markets are currently pricing in a 29% chance of a 50bps rate cut, down from about 47% seen before the NFP data was released, CME Group’s FedWatch Tool shows. Discounts of around 110 bps are set for the rest of the year.

Against this backdrop, Wall Street indices rebounded strongly, but the downward trend in US Treasury yields allowed the underperforming gold price to post a brief recovery on Monday.

All eyes remain on US inflation data

Wednesday. The data is likely to increase volatility around the US dollar and, in turn, the price of gold. US inflation data will be key to determining Fed rate cuts after September.

Meanwhile, the price of gold will remain at the mercy of risk trends in the absence of top US data on Tuesday. In addition, the Fed went into a “blackout period” on Saturday ahead of the September 18 policy decision, leaving the price of gold to oscillate in a familiar range.

Gold Price Technical Analysis: Daily Chart

Nothing seems to have changed for the price of gold from a short-term technical perspective, as buyers continue to remain hopeful as long as the 21-day simple moving average (SMA), now at $2,499, is defended.

The 14-day Relative Strength Index (RSI) has edged lower, still remaining well above the 50 level, supporting bullish bias.

After returning to the daily close of $2,500 on Monday, gold buyers are now eyeing a record high of $2,532, above which the psychological level of $2,550 will come into play.

If gold price again faces rejection near the $2,530 supply area, a correction would follow, with a daily close below the 21-day SMA at $2,499 needed for a sustained decline.

A breach of the latter will trigger the previous week’s low of $2,472, followed by symmetrical triangle resistance, turned into support at $2,461.