Gold Price Forecast: XAU/USD sees downside below $1,740, spotlight is on US Inflation

• Gold price is displaying a lackluster performance, downside looks likely as DXY reclaims day’s high.
• The Fed has already deployed restrictive quantitative measures, however, the inflation rate is still solid.
• The precious metal is on the verge of witnessing a downside break of the week-old consolidation.

Gold price (XAU/USD) has carry-forwarded its back-and-forth moves structure in the early European session. The precious metal is displaying subdued performance, however, the downside is warranted on soaring bets over the maintenance of the status quo by the Federal Reserve (Fed) in its July interest rate decision.

Fed chair Jerome Powell announced a 75 basis point (bps) rate hike and a similar announcement is expected ahead. The inflation rate is not showing any slowdown signals despite the deployment of the policy tightening measures. The interest rates have already elevated to 1.50-1.75% in the past three monetary policy meetings along with the balance sheet reduction program.

Meanwhile, the US dollar index (DXY) has recaptured its intraday high after a minor corrective move. The DXY is aiming for higher levels while the gold prices will display a severe downside after violating the crucial support of $1,740.00. This week, the release of US inflation will be of utmost importance. The annual plain-vanilla Consumer Price Index (CPI) figure is seen at 8.7% while the core CPI may slip to 5.7%.

Gold technical analysis

On a broader note, the gold prices are juggling in a $1,730.73-1,752.49 range. The 20-period Exponential Moving Average (EMA) at $1,741.92 is overlapping with the gold prices. Also, the 50-EMA at $1,745.00 has turned flat, which signals a consolidation ahead. The Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range. The broader weakness in the bright metal will accelerate further if the RSI (14) surrenders the support at 40.00 levels.

Gold hourly chart