Gold Price Forecast: XAU/USD drops towards $1,810 as yields rebound ahead of US inflation

• Gold snaps four-day uptrend, reverses from two-month high.
• Market sentiment worsens as reflation fears escalate ahead of US CPI.
• China, stimulus headlines add to the risk-off mood.
• Gold Price Forecast: Looking to extend its rally beyond September high

Gold (XAU/USD) takes offers to refresh intraday low near $1,825, flashing the first daily loss in a week heading into Wednesday’s European session. In doing so, the yellow metal steps back from a two-month high while failing to successfully cross the multi-month-old resistance line ahead of the key inflation data from the US.

Fears concerning inflation, worries emanating from China and doubts over the US stimulus underpin the rush to the risk-safety, which in turn helps the greenback and weigh on the gold prices.

Fed Chair Jerome Powell’s failure to placate rate hike bets, backed by the strong US inflation expectations, precede hawkish comments from St. Louis Federal Reserve (Fed) President James Bullard to highlight the latest relation fears. Fed’s Bullard spoke to CNBC early in Asia to convey expectations of expecting the US central bank to hike its benchmark rate twice in 2022, after it’s finished with winding down its bond-buying program.

On a different page, a 50% slump in share prices of China’s real estate player Fantasia Group after a month-long trading halt and Evergrande’s coupon payment date joins strong inflation numbers from Beijing to weigh on the risk appetite.

Against this backdrop, S&P 500 Futures decline 0.40% whereas the US 10-year Treasury yields consolidate the previous day’s losses around the six-week low near 1.46%.

Looking forward, inflation numbers from the US will be the key catalyst for short-term gold moves. Should the price pressure remain escalated, the USD strength could keep the quote directed towards the south.

Read: US October CPI preview: Inflation data unlikely to discourage gold bulls

Technical analysis

Gold keeps the upside break of a two-month-old horizontal hurdle, now support, while easing from a descending resistance line from August 2020.

Although MACD signals do favor buyers, the RSI line needs more fuel as the metal inches closer to a 15-month-old resistance line near $1,832, not to forget the key $1,834-35 resistance line that defeated bulls twice since July.

Hence, a weekly closing beyond $1,835 becomes necessary for the gold prices to rise further towards early June’s low near $1,857-58 and then to the $1,900 threshold.

Failing to which could trigger a pullback targeting the resistance-turned-support from mid-September, near $1,808-10.

It should be noted, however, that an ascending trend line from August near $1,750, will challenge the gold bears afterward.

Gold: Weekly chart

Trend: Pullback expected