Gold Price Forecast: XAU/USD eyes further losses below $1,850 on strong USD ahead of US inflation

• Gold bears attack short-term key support around $1,840 during three-day downtrend.
• Firmer yields underpin US dollar strength amid hopes of faster/heavier Fed rate hikes.
• China headlines, pre-ECB mood challenge bears amid lackluster session.
• Second-tier US data, risk catalysts can entertain traders ahead of US CPI, ECB.

Gold Price (XAU/USD) remains pressured around a one-week low, down 0.13% intraday, as sellers poke a short-term key support confluence near $1,840 during Tuesday’s Asian session.

That said, the precious metal’s latest weakness could be linked to the firmer US Dollar Index (DXY), which in turn takes clues from the US Treasury yields.

It’s worth noting that the US Dollar Index (DXY) dribbles around mid-102.00s after a two-day uptrend, not to forget the first weekly jump in three while the US Treasury yields to extend the first weekly gains in four, firmer around 3.04% after rising 10 basis points (bps) on Monday.

Friday’s strong US Nonfarm Payrolls (NFP) and the hawkish appearance of the Fedspeak’s last dose before the blackout norm favored the US Treasury yields to snap a three-week downtrend. The same underpins the recently escalating hopes of a 0.5% rate hike during September, versus previously thin chatters surrounding the key issue.

However, upbeat headlines from China and the market’s anxiety ahead of Thursday’s European Central Bank (ECB) monetary policy meeting, as well as Friday’s US Consumer Price Index (CPI) for May, seem to test the gold sellers.

Recently, China Securities Journal (CSJ) praised the country’s virus control and policy stimulus while expecting economic improvement in the second half (H2) of 2022. Previously, Beijing’s ability to overcome the pandemic and citing preparations to recover from the economic loss with faster unlocks joined US President Joe Biden’s likely easy stand for China, as far as showing readiness to remove Trump-era tariffs, seemed to have favored sentiment and tested the US dollar’s safe-haven appeal. Considering China’s status as one of the world’s biggest gold consumers, positive headlines for the dragon nation favors the XAU/USD prices.

Looking forward, gold traders should keep their eyes on the risk catalysts, as well as the US CPI and ECB, for clear directions. However, the US Goods and Services Trade Balance for the said month, forecast at $-89.5B compared to $-109.8B previous readouts, can also direct short-term moves.

Technical analysis

Gold Price justifies an impending bear cross and RSI retreat as sellers jostle with the 200-DMA and an upward sloping support line from mid-May.

The bearish bias also gains momentum from the metal’s U-turn from a fortnight-old horizontal resistance area near $1,870-75.

Even so, a clear downside break of the $1,840 support confluence becomes necessary for the XAU/USD bears to approach the recent swing low surrounding $1,828.

Following that, a downturn towards the $1,800 threshold and then to May’s low near $1,785 can’t be ruled out.

Alternatively, a clear upside break of $1,875 appears necessary for the gold buyers before challenging a convergence of the 50-DMA and the 100-DMA, near $1,888-90.

Gold: Daily chart

Trend: Further weakness expected