Gold Price Forecast: XAUUSD prints hidden bearish divergence below $1,700, US inflation eyed

• Gold price picks up bids to pare the week-start losses.
• Hidden bearish divergence challenge upside momentum amid sluggish session.
• Market’s cautious optimism, talks of Fed’s pivot favor buyers ahead of the key US CPI for October.

Gold price (XAUUSD) recovers from an intraday low to $1,675 during Tuesday’s sluggish Asian session. In doing so, the yellow metal reverses the previous day’s pullback from the monthly high amid a broadly softer US dollar.

That said, the US Dollar Index (DXY) takes offers to refresh the intraday low near 110.00, down for the third consecutive day. The DXY’s latest weakness could be linked to the recently mixed comments from the US Federal Reserve (Fed) policymakers, suggesting a halt in the strong rate hike trajectory, especially after Friday’s mixed US jobs report.

Additionally, hawkish comments from the European Central Bank (ECB) policymakers, firmer data from Eurozone and the market’s wait for this week’s key US Consumer Price Index (CPI) could also be held responsible for the XAUUSD’s recent pick-up.

However, fears surrounding China’s covid conditions and the recently firmer US inflation expectations challenge gold buyers. That said, China turned down the hopes of easing the zero-covid policy during the weekend after witnessing a multi-day high print of the daily virus counts. Additionally, the US inflation precursors, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, print one-week highs of 2.53% and 2.61% according to the latest readings.

Amid these plays, the US Treasury yields are firmer and stock futures also print mild gains while tracking Wall Street’s firmer closing.

Moving on, gold traders need fresh clues and may seek headlines from China and the Fed ahead of the US inflation data for clear directions. In doing so, the metal prices may remain lackluster.

Technical analysis

Gold price defends the previous week’s upside break of a descending resistance line from October 11, now support around $1,665, as RSI (14) hints at the bearish move.

That said, the XAUUSD portrays the lower high formation since early October but the RSI is on the north run each time, suggesting the bulls are out of moves and struggling to keep the reins.

As a result, the odds of the metal’s pullback towards the aforementioned resistance-turned-support near $1,665 appear brighter. Following that, the 200-SMA level near $1,660 could act as the last defense of the gold buyers.

Alternatively, an upside clearance of the recent tops near $1,683 turns down the bearish signals suggested by the RSI and price match.

In that case, the gold price could quickly rally to the $1,700 threshold before challenging the previous monthly peak surrounding $1,730.

Gold price: Four-hour chart

Trend: Pullback expected