Gold Price Forecast: XAUUSD eyes another battle with $1,720 hurdle as US dollar retreats ahead of CPI

• Gold price reverses the previous day’s pullback from monthly high amid softer DXY.
• Markets remain dicey ahead of US CPI for October, central bankers’ comments underpin recent cautious optimism.
• Downbeat yields weigh on greenback amid hopes of softer US inflation, slower Fed rate hike in December.

Gold price (XAUUSD) extends the early-day recovery to $1,711 as European traders roll up their sleeves for the key US inflation data on Thursday. With this, the XAUUSD reverse the previous day’s U-turn from the highest levels in nearly two months. However, a technical hurdle surrounding $1,720 appears crucial for the bullion's further upside.

The metal’s latest run-up could be linked to the US dollar’s broad weakness amid multiple comments/updates from the central bankers of the US, Japan and Australia, not to forget from New Zealand.

While the US policymakers convey economic fears and recent data to suggest the need for softer rate increases, Bank of Japan (BOJ) Governor Haruhiko Kuroda defends the easy money policy in testimony to the Diet, the Japanese parliament. Elsewhere, officials from the Reserve Bank of Australia (RBA) also sound a bit relaxed and suggest less urgency for rate increases whereas the Reserve Bank of New Zealand’s (RBNZ) internal report regretted the delay in policy action.

Elsewhere, a slight decline in China’s covid numbers and Russia’s retreat from Kherson also appeared to have weighed on the US Dollar, as well as favored the XAUUSD buyers.

Amid these plays, the US Treasury yields remain pressured while the S&P 500 futures print mild gains. Further, the Asian equities trade mixed whereas the US Dollar Index (DXY) reverse the previous day’s rebound from the two-month low.

Looking forward, softer DXY can favor the gold buyers as they approach the $1,720 key hurdle. However, a mild weakness in the US inflation data is already priced in and hence a surprisingly strong CPI for October won’t hesitate to pull the quote back below $1,700. Forecasts suggest that the headline CPI will ease to 8.0% YoY from 8.2% prior while the more important Core CPI may remain mostly unchanged near 6.5%, compared to 6.6% previous readings.

Technical analysis

Gold’s refrain from extending the previous day’s pullback below the $1,700 joins the bullish MACD signals and firmer RSI (14) direct buyers towards the $1,720 key hurdle comprising the 100-DMA and a two-month-old resistance line.

The metal’s upside past $1,720, however, remains bumpy as tops marked in October and September, respectively near $1,730 and $1,735, could challenge the bulls.

Meanwhile, pullback moves may aim for the 38.2% Fibonacci retracement level of August-September downside, close to $1,688.

However, the XAUUSD bears remain unconvinced beyond the $1,673-75 support confluence, encompassing the 50-DMA and previous resistance line from August.

Overall, gold price appears bullish but the room towards the north is limited.

Gold price: Daily chart

Trend: Further upside expected