Gold Price Forecast: XAU/USD declines to near $1,720 despite subdued DXY, US Inflation eyed

• Gold prices have faced a sell-off amid lower consensus for US Inflation.
• A back-to-back decline in the inflation rate will bolster the case of exhaustion in the price pressures.
• The precious metal is oscillating in a volatility contraction pattern ahead of US CPI.

Gold price (XAU/USD) has delivered a downside break of the consolidation formed in a narrow range of $1,720.89-1,723.08 in the Asian session. The precious metal is declining after printing a fresh two-week high around $1,735.00 on Monday. The gold prices are witnessing the heat amid lower consensus for US inflation.

Investors should be aware of the fact that the precious metal is considered an inflation-hedged tool and a decline in the US inflation forecast has forced the market participants to trim their longs from the gold counter. The estimates for the headline US Consumer Price Index (CPI) that inculcates oil and food prices are at 8.1% significantly lower than the former figure of 8.5%.

A back-to-back decline in the inflation rate is sufficient to bolster the case of exhaustion in the price pressures. While, the core US CPI is seen higher at 6%, 10 basis points (bps) above from the prior release.

Meanwhile, the US dollar index (DXY) is displaying a lackluster performance. The asset is oscillating in a narrow range of 108.14-108.27 range as investors are awaiting the release of the US inflation for an informed decision.

Gold technical analysis

On an hourly scale, the gold prices are auctioning in a Symmetrical Triangle chart pattern, which advocates a volatility contraction ahead. However, a break of the same on either side results in wider ticks and heavy volume.

The 50-period Exponential Moving Average (EMA) at $1,722.00 is overlapping with the gold prices, which indicates an ongoing consolidation in the counter.

While, the Relative Strength Index (RSI) (14) has slipped into the 40.00-60.00 range, which signals that the bullish bias has been trimmed for now.

Gold hourly chart