Gold Price Forecast: XAU/USD rebound appears lucrative above $1,660, US inflation in focus

• Gold price extends the recent bounce off previous resistance line amid US dollar pullback.
• Sluggish session, light calendar and mixed clues allow traders to brace for US CPI.
• Firmer inflation could trigger fresh XAU/USD downside amid hawkish Fed bias.

Gold price (XAU/USD) remains sidelined around $1,675 during Thursday’s Asian session, after bouncing off a short-term key support line, previous resistance, earlier in the week. In doing so, the precious metal portrays the typical pre-data trading lull ahead of the US Consumer Price Index (CPI) data for September.

It should be noted that the US action to increase hardships for Chinese chip manufacturer joins hawkish Fedspeak to exert downside pressure on the quote. However, Chinese media chatters suggesting the government’s plan to buy houses as a part of the stimulus seemed to have put an immediate floor under the XAU/USD.

That said, Federal Reserve Governor Michelle Bowman said that if high inflation does not start to wane she will continue to support aggressive rate rises aimed at taming price pressures, reported Reuters.

On the same line, the latest Federal Open Market Committee (FOMC) Meeting Minutes, published Wednesday, failed to impress the US dollar bulls despite showing the policymakers’ hawkish bias amid concerns over more persistently high inflation. The Fed Minutes also mentioned that the participants agreed the Committee needed to move to, and then maintain, a more restrictive policy stance in order to meet the Committee’s legislative mandate to promote maximum employment and price stability.

As a result, the CME’s FedWatch Tool prints a nearly 85% chance of the Fed’s 75 bps rate hike in November.

Against this backdrop, the benchmark US 10-year Treasury yields remain sidelined around 3.90%, pausing the two-day downtrend, whereas the S&P 500 Futures print mild gains.

It’s worth mentioning that the US Producer Price Index (PPI) printed 8.5% YoY figures for September versus 8.4% expected and 8.7% prior, which in turn suggests further downside for the XAU/USD if the CPI figures don’t unveil the anticipated weakness. Forecasts suggest that the headlines CPI will ease to 8.1% YoY versus 8.3% prior but the more important CPI ex Food & Energy is likely to increase to 6.5% YoY from 6.3% prior and can trigger more downside considering the recession woes.

Technical analysis

Gold price remains above the resistance-turned-support line stretched from early August despite the latest lackluster performance. The same joins bullish MACD signals and firmer RSI (14) keeping buyers hopeful of portraying another battle with the 50-DMA hurdle surrounding $1,714.

However, a four-month-old bearish trend channel’s resistance line, close to $1,730 by the press time, appears a tough nut to crack for the XAU/USD bulls afterward, which in turn could challenge the upside momentum and keep the sellers hopeful. Should the quote rises past $1,730, the buyers could aim for August month’s high near $1,807.

Alternatively, a downside break of the aforementioned previous resistance line, near $1,660, will need validation from the multiple supports around $1,650 and $1,643 before directing gold bears toward the yearly low near $1,615. In a case where the bullion prices remain weak past $1,615, the stated channel’s lower line, close to $1,600 at the latest, will be in focus.

Overall, gold prices remain firmer unless the bears provide a daily closing below $1,660 support.

Gold: Daily chart

Trend: Further recovery expected