Gold Price Forecast: XAU/USD consolidates recent gains to two-week top, around 61.8% Fibo.

• Gold touched a two-week high on Thursday, albeit lacked any follow-through buying.
• The risk-on impulse in the markets capped the metal amid hawkish Fed expectations.
• Traders also refrained from placing aggressive bets ahead of the US CPI on Thursday.

Gold now seems to have entered a bullish consolidation phase and oscillated in a narrow trading band around the $1,825-$1,830 region, or a two-week high touched earlier this Wednesday. Concerns about the persistent rise in consumer prices turned out to be a key factor that continued benefitting the metal's status as a hedge against inflation. Apart from this, modest US dollar weakness extended some support to the dollar-denominated commodity and acted as a tailwind for spot prices. That said, elevated US Treasury bond yields, bolstered by rising bets for a 50 bps Fed rate hike in March, capped gains for the non-yielding yellow metal.

Investors seem convinced that the Fed would adopt a more aggressive monetary policy response to combat stubbornly high inflation. The bets were reinforced by Friday's blockbuster US jobs report (NFP), which, in turn, pushed the yield on the benchmark 10-year US government bond to its highest level since August 2019 on Tuesday. Adding to this, the 2-year and 5-year notes – which are highly sensitive to rate hike expectations – rose to the highest level since February 2020 and July 2019, respectively. Hence, the market focus will remain glued to the release of the US CPI report on Thursday, warranting caution before placing directional bets.

In the meantime, the risk-on impulse – as depicted by a bullish sentiment around the global equity markets – could keep a lid on any meaningful upside for the safe-haven gold. In the absence of any major market-moving economic releases from the US, the US bond yields will influence the USD price dynamics and provide some impetus to the XAU/USD. Apart from this, traders will take cues from the broader market risk sentiment to grab some short-term opportunities on Wednesday.

Technical outlook

From a technical perspective, the recent bounce from the lowest level since December 16, paused near the 61.8% Fibonacci retracement level of the $1,854-$1,780 downfall. Given     that technical indicators on the daily chart have just started moving into the positive territory, sustained strength beyond will be seen as a fresh trigger for bullish traders. Gold could then surpass an intermediate hurdle near the $1,842 region and accelerate the momentum to retest 2022 high, around the $1,853-$1,854 region touched on January 25.

On the flip side, any meaningful pullback now seems to find decent support near the 50% Fibo. level, around the $1,818 region. This is closely followed by the overnight swing low, around the $1,815 area, below which gold could slide further towards the $1,808-$1,806 confluence. The latter comprises the 38.2% Fibo. level and the very important 200-day SMA. A convincing break below will negate any near-term positive bias and prompt some technical selling. The XAU/USD would then turn vulnerable to break below the $1,800 mark and slide further towards last week’s swing low, around the $1,788 area en-route the YTD low, around the $1,780 level.

Gold daily chart

Levels to watch