Gold Price Forecast: XAU/USD clings to gains above $1,860, focus remains on US CPI report

• Gold price regains positive traction on Tuesday amid the ongoing US Dollar retracement slide.
• Recession fears also benefit the safe-haven XAU/USD, though the uptick lacks follow-through.
• Investors keenly await the release of the crucial consumer inflation data from the United States.

Gold price attracts some buying on Tuesday and recovers a major part of the previous day's slide to the $1,850 level, or its lowest level since January 6. The XAU/USD sticks to modest intraday gains through the first half of the European session and is currently trading just above the $1,860 level, up nearly 0.50% for the day.

Weaker US Dollar, recession fears benefit Gold price

The US Dollar (USD) extends the overnight pullback from a multi-week top amid a further decline in the US Treasury bond yields. This, in turn, is seen as a key factor benefitting the US Dollar-denominated Gold price. Adding to this, the cautious market mood - amid looming recession risks - offers additional support to the safe-haven precious metal, though the uptick lacks bullish conviction.

Focus remains on consumer inflation figures from United States

Traders now seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of the latest Consumer Price Index (CPI) data from the United States (US). The crucial US CPI report will play a key role in influencing the Federal Reserve’s (Fed) next policy moves. This, in turn, will drive the USD demand and provide a fresh directional impetus to the non-yielding Gold price.

Federal Reserve’s hawkish outlook should cap Gold price

The Labor Department's annual revisions of CPI data showed last Friday that monthly consumer prices in the US rose in December instead of falling as previously estimated. This raises the risk of a stronger US CPI print, which could allow the US central bank to stick to its hawkish stance for longer. The prospects for further tightening by the Fed could boost the Greenback and undermine the Gold price.

Several Federal Open Market Committee (FOMC) policymakers, including Fed Chair Jerome Powell, recently stressed the need for additional interest rate hikes to fully gain control of inflation. Hence, the immediate market reaction to a softer-than-expected US CPI print is more likely to remain limited. This, in turn, suggests that the path of least resistance for Gold price is to the downside.

Gold price technical outlook

From a technical perspective, the overnight break below the 50-day Simple Moving Average (SMA) could be seen as a fresh trigger for bearish traders. Hence, any subsequent recovery might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the $1,872-$1,875 region. This is closely followed by the $1,890 hurdle, above which Gold price could surpass the $1,900 mark and test the next relevant resistance near the $1,925-$1,930 congestion zone.

On the flip side, the $1,850 level now seems to protect the immediate downside. Some follow-through selling could drag Gold price further towards the $1,830 intermediate support en route to the $1,818-$1,817 zone and the $1,800 round figure.

Key levels to watch