Gold Price Forecast: XAUUSD plummets on soft US Treasury auction

• Gold is now back in the hands of the bears as traders get set of US CPI.
• US yields and the Dollar rising may have set the high of the week in Gold. 

Gold is under pressure following, dropping at the turn of the past hour after a spike to the day's highs, trapping breakout traders long when the US treasury notes sold today at 4.140% compared to 4.106% in the moments before the auction in the WI market. Since the sale, Us yields have surged, supporting the US dollar and weighing heavily on gold. 

Gold is currently trading at $1,702.46, down some 0.46% after falling from a high on the day of $1,722.34 and is taking on the London of $1,703.16. Meanwhile, the Gold price has given something to both the bulls and the bears on the day as the following analysis will illustrate. 

Looking ahead, all eyes will be on the US inflation data in Thursday's US Consumer Price Index. Investors will be looking for clues in the data to see if it can spur the Federal Reserve to continue to increase interest rates well into next year. The data could be a good litmus test to gauge whether investors are about to turn their backs on the greenback once and for all despite the Fed's Chair, Jerome Powell, recent pushback against the pivot sentiment.

Gold technical analysis

The price of gold remains on the front side of the bullish trendline. However, a low was put in by London and then in the opening of the New York session. The price subsequently rallied on the back of the double-bottom low and has potentially just locked in the high for the rest of the week which the following will show from a bearish perspective ahead of US CPI.

As we can see below, there is now an M-formation left on the chart which is a topping pattern. While the price could be expected to come in to retest the neckline, the bias is for a move to the bullish trendline for the sessions ahead:

Gold M1 chart

For some background on the price action that got is to hear and in order to help us arrive at the bearish scenario, the above chart illustrates the price flow since the London lows on the 1-minute chart. A fresh high was set at the start if New york day and a subsequent low was the bull's grounds for a buy into what could be the highs of the week. The strength of US yields and the US dollar have seen to that. 

Gold bearish scenario

Zoomed in...

As illustrated, we could now have the high of the week locked in. There are traders trapped in long positions above and stops below. This is the ideal scenario for sellers. A move below the triple bottom lows of $1,703/04 opens the risk of a significant flush out of stale stop losses that have been trailing higher for the whole week and since last Friday's rally.