Gold Price Forecast: XAU/USD approaches $1,970 amid a sell-off in USD Index, US CPI and Fed policy eyed

• Gold price is approaching the $1,970.00 resistance as the USD Index has resumed its downside journey.
• S&P500 futures have posted stellar gains as investors have underpinned the risk-appetite theme.
• More interest rate hikes by the Fed are less certain as tight lending conditions by US commercial banks have trimmed liquidity.

Gold price (XAU/USD) is marching towards the crucial resistance of $1,970.00 after a strong recovery from $1,956.00 in the London session. The precious metal has attracted significant bids after a sell-off in the US Dollar Index (DXY).

S&P500 futures have posted stellar gains in Europe as investors have underpinned the risk-appetite theme. US equities are becoming the talk of the town as investors are hoping that the Federal Reserve (Fed) will choose a steady interest rate policy.

Earlier, Fed chair Jerome Powell announced that more interest rate hikes are less certain as tight lending conditions by United States commercial banks are barricading inflationary pressures. And, now easing labor market conditions is a cherry on the cake, which is providing the Fed the luxury of keeping interest rates steady.

Meanwhile, the US economic activities are also demonstrating a poor show as manufacturing activities are consistently contracting and services activities are barely showing expansion.

The US Dollar Index is looking to resume its downside journey amid the inability of sustaining above the intermediate support around 103.30. Contrary to that, the US Treasury yields are choppy. The returns generated on 10-year US Treasury bonds are holding above 3.75%.

Gold technical analysis

Gold price is consolidating in a narrow range of $1,954-1,970 on a two-hour scale, which indicates a volatility contraction followed by wider ticks and heavy volume. On a broader note, the upside of the Gold price is restricted from May 18 high around $1,986.00 while the downside is limited to May 26 low around $1,936.77.

A straight 50-period Exponential Moving Average (EMA) at $1,959.70 indicates that the overall trend is non-directional.

Also, the Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range, which conveys that investors are awaiting a potential trigger.

Gold four-hour chart