Gold prices are regaining upward momentum in early Asian trading on Wednesday, with the precious metal managing to defend critical support near the $3,300 mark this week. Investors are now squarely focused on the upcoming U.S. Consumer Price Index (CPI) data, which could shape expectations for the Federal Reserve’s next policy move.
U.S.-China Trade Optimism Lends Support, but Risks Linger
Following two days of high-level trade talks in London, reports emerged that U.S. and Chinese negotiators have agreed on a framework that could potentially ease long-standing trade tensions between the two economic superpowers. The optimism surrounding the talks has helped stabilize risk sentiment and provided a mild boost to the U.S. Dollar (USD).
However, uncertainty remains after a U.S. Appeals Court upheld President Donald Trump’s authority to impose reciprocal tariffs. The lack of clarity on the direction of U.S. trade policy has dampened broader market enthusiasm, allowing gold to attract renewed safe-haven interest.
Markets Eye Inflation Report for Policy Signals
Traders remain cautious ahead of Wednesday’s U.S. CPI release, which could significantly impact market expectations for a potential Fed rate cut in September. Current futures pricing suggests a 52% probability of a 25-basis-point reduction at that meeting.
Economists expect headline inflation to rise by 0.2% in May, with core inflation forecast to increase by 0.3%. A stronger-than-expected CPI print could delay rate cut expectations, likely strengthening the dollar and weighing on gold prices. Conversely, softer inflation data would likely reinforce dovish expectations and support further gains in non-yielding assets like gold.
The outcome of the CPI data could be further complicated by any new trade-related developments, while investors also await the results of U.S. 10-year Treasury bond auctions scheduled for Wednesday and Thursday.
Gold Technical Outlook: Key Levels in Focus
On the daily chart, gold remains in a bullish setup as long as it holds above the $3,297 support level, which represents a confluence of the 21-day Simple Moving Average (SMA) and the 38.2% Fibonacci retracement of the April rally.
The 14-day Relative Strength Index (RSI) continues to hover above the midline, currently at 54, indicating sustained bullish momentum.
A daily close below $3,297 would expose downside risks toward the 50-day SMA at $3,262.
The next major support lies at $3,232, marking the 50% Fibonacci retracement of the previous uptrend.
On the upside, resistance is expected near the psychologically significant $3,350 level. A break above that could pave the way toward the 23.6% Fibonacci resistance at $3,377, with a potential test of May’s high at $3,439 if bullish momentum accelerates.
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