Gold Price Forecast: XAU/USD remains depressed near $1,850, inflation fears to limit losses

• Gold edged lower on Friday and snapped six days of the winning streak to multi-month tops.
• Hawkish Fed expectations seemed to be the only factor that prompted some profit-taking.
• Inflation fears should help limit the corrective pullback and attract dip-buying at lower levels.
• Gold Price Forecast: XAU/USD awaits acceptance above $1,870, focus on US consumer data

Gold witnessed some selling on Friday and for now, seems to have snapped six consecutive days of the winning streak. In the absence of fresh catalyst, bulls preferred to take some profits off the table following the recent strong run-up to the highest level since June 14 and hawkish Fed expectations.

This week's hotter-than-expected US CPI print fueled speculations that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. In fact, the Fed funds futures indicate that the first-rate hike could come as soon as July 2022. The prospects for an early policy tightening by the Fed was reinforced by elevated US Treasury bond yields, which, in turn, drove flows away from the non-yielding yellow metal.

This, along with the prevalent bullish sentiment surrounding the US dollar, acted as a headwind for dollar-denominated commodities, including gold. Apart from this, stability in the financial markets also did little to lend any support to the safe-haven precious metal, or stall the intraday decline to the $1,845 region during the mid-European session. That said, worries about a faster-than-expected rise in inflationary pressures helped limit the downside for the XAU/USD, which is a proven long-term hedge against rising prices.

Hence, any subsequent pullback might continue to attract some dip-buying near the $1,834-32 strong horizontal resistance breakpoint. Nevertheless, gold remains on track to post its biggest weekly gains in six months and seems poised to appreciate further. A sustained move beyond the $1,865 region, or multi-month tops touched on Wednesday, will reaffirm the bullish bias and set the stage for an extension of the upward trajectory.

Technical outlook

Looking at the technical picture, gold this week confirmed a bullish breakout through the $1,834-32 supply zone and ascending trend-channel resistance. This further adds credence to the near-term constructive outlook, though slightly overbought RSI on short-term charts kept a lid on any further gains.  Bulls might also wait for a sustained move beyond the $1,865 region before placing fresh bets around gold. The commodity might then accelerate the momentum towards testing an intermediate hurdle near the $1,886-87 region and aim to reclaim the $1,900 mark.

On the flip side, the ascending channel resistance breakpoint, coinciding with the $1,834-32 supply zone, should now act as a strong base for spot prices. Some follow-through selling might trigger long-unwinding trade and drag gold towards the next relevant support near the $1,815 horizontal zone en-route the $1,800 mark.

Gold daily chart