Gold Price Forecast: XAU/USD picks up from lows and returns above $1,670

• Gold bounces up from $1,642 lows and returns to the $1,670 area.
• The US dollar pulls back after the post-CPI rally.
• XAU/USD remains weak, capped below $1.680.

Gold futures are retracing previous losses during Thursday’s US trading session, favored by a broad-based USD pullback. The yellow metal has bottomed at a two-week low of $1,642 before returning to 4 1,670 at the time of writing.

The dollar gives away gains after a post-CPI rally

The greenback is losing ground after the bullish reaction triggered by the release of US CPI data. Consumer prices increased at a 0.4% pace in September, beating expectations of a 0.2% rise, which boosted hopes of a 100 basis point rate hike by the Federal Reserve in November.

Federal Fund Futures priced in a 13% chance that the Federal Reserve could accelerate its hiking pace at the next month’s meeting. The Dollar Index (DXY) rushed higher, to hit a session high right below 114.00, nearing the recent 20-year high of 114.70.

The US dollar seems to have lost steam, as the market confronts the data with the slight dovish tilt observed in September’s FOMC minutes released on Wednesday.

XAU/USD: Upside attempts remain capped below $1,685

The precious metal has reversed losses on Thursday, yet, the near-term bias remains negative, with the pair capped below October 11 high at $1,685. A confirmation above that level might increase bullish momentum, to advance towards $1,730 (September 12 high), ahead of early August highs right above $1,800.

On the downside, initial support lies at $1,650/60 (mid-September lows), and below here, October 3 low at $1,612 and then probably April 2020 low at $1,575.

Technical levels to watch