Gold Price Forecast: XAU/USD stays below 20-day EMA, sees further downside below $3,940

Gold price (XAU/USD) is down 0.7% to near $4,030 during the European trading session on Thursday. The precious metal faces selling pressures as global inflation concerns remain intact amid elevated energy prices in the wake of widening military aggression between the United States (US) and Iran.

During the day, a drone crash into an oil tanker in Iraq's Basra terminal has resulted in the suspension of all crude loading on all Iraqi terminals. This has renewed fears of lower oil supply, a scenario that will keep energy prices elevated.

The scenario of higher energy prices de-anchors global inflation expectations, which prompts fears of tight monetary conditions by central banks. Theoretically, higher interest rate hike expectations bode poorly for non-yielding assets, such as Gold.

The war between the US and Iran could intensify further, as US President Donald Trump has warned of authorizing forces to attack Iranian infrastructure, most probably next week, if the nation doesn’t return to the table for negotiations, according to his comments in an interview with Fox News on Wednesday.

Meanwhile, easing hawkish Fed prospects are likely to limit the downside in the Gold price. Traders have dialed down the Fed’s interest rate hike expectations as US consumer and producer inflation has cooled down in July.

According to the CME FedWatch tool, the odds of the Fed delivering an interest rate hike in the July meeting have eased to 10.2% from 24.6% recorded a week ago.

Gold technical analysis

XAU/USD trades lower at around $4,030, keeping a bearish near-term tone as spot remains below the 20-period exponential moving average (EMA) at $4,113.96.

The downside bias is reinforced by a mid-range Relative Strength Index (RSI) around 40, which suggests weak but persistent selling pressure rather than oversold exhaustion.

On the topside, initial resistance is clearly defined by the 20-day EMA at $4,113.96, and a sustained break above this barrier would be needed to ease the current bearish pressure. Looking down, the Gold price could slide towards the October 28 low of $3,886.62 if it falls below the June 30 low of $3,941.76.