Gold Price Forecast: XAU/USD retreats towards $1,650 on firmer DXY, focus on US PCE inflation

• Gold price extends the previous day’s downbeat performance, sellers attack weekly support line.
• Markets sentiment soars amid mixed US data, downbeat yields and a firmer DXY.
• XAU/USD bears need validation from Fed’s preferred inflation gauge amid hopes of easing rate hikes.

Gold price (XAU/USD) remains pressured for the second consecutive day as sellers poke short-term key support around $1,660 during Friday’s Asian session. In doing so, the bullion justifies a firmer US dollar amid the risk-off mood. Also exerting downside pressure on the metal could be the anxiety ahead of the Fed’s preferred inflation gauge, namely the US Core PCE Price Index for September.

That said, the US Dollar Index (DXY) recovered from a five-week low after the Gross Domestic Product (GDP) rose 2.6% on an annualized basis, more than expected, in the third quarter (Q3). Even so, a fifth consecutive fall in private consumption challenged the Fed hawks as it showed the policymakers are gradually nearing the target of slowing down private domestic demand, which in turn might favor the easy rate hike talks for December in the next week’s Federal Open Market Committee (FOMC) meeting. As a result, the gold bears struggle to retake control even as the DXY bounces off a multi-day low backed by strong US GDP.

Elsewhere, the US 10-year Treasury yields dropped to a two-week low on Thursday and are bracing for the first weekly loss in 11 amid receding hawkish Fed bets. The same allowed equities to have a nice week despite the latest weakness in numbers, which in turn lured XAU/USD buyers despite the risk-off mood.

Moving on, a fall in the US equities and recently firmer yields help XAU/USD bears amid a sluggish session ahead of the Core PCE Price Index for September, expected to rise to 5.2% versus 4.9% prior. It’s worth mentioning that a firmer print of the Fed’s preferred inflation gauge could add strength to the yields and hawkish Fed bets, which in turn will be favorable for the gold bears.

Technical analysis

Gold extends pullback from 200-SMA as sellers poke a one-week-old support line near $1,660 amid the RSI retreat. That said, the 50-SMA support near $1,650 adds to the downside filters before welcoming the XAU/USD bears targeting the yearly low surrounding $1,614.

It’s worth noting that multiple levels surrounding $1,620 could test the metal sellers while the $1,600 psychological may lure the downside move past $1,614.

Meanwhile, an upside clearance of the 200-SMA, around $1,667 by the press time, could direct the gold buyers towards a 13-day-old descending resistance line surrounding $1,675.

To sum up, gold prices are likely to remain pressured toward a yearly low.

Gold: Four-hour chart

Trend: Further weakness expected