Gold Price Forecast: XAU/USD sellers aim for $1,690 with eyes on US inflation

• Gold price fades upside momentum, breaks three-day-old support amid sluggish session.
• Firmer yields, fears surrounding China/Russia seemed to have recalled XAU/USD sellers.
• US consumer-centric data appears key for fresh impulse amid Fed blackout period.

Gold price (XAU/USD) retreats from a one-week high, flashed the previous day, to $1,713 heading into Monday’s European session. In doing so, the bullion traders seem to take clues from the firmer US Treasury yields, as well as the fears surrounding China and Russia.

US 10-year Treasury yields add two basis points (bps) to 1.34% while reversing the previous day’s downbeat performance amid Monday’s sluggish session, due to China’s holiday and a light calendar. Even so, recently hawkish comments from the policymakers of the European Central Bank (ECB) and the US Federal Reserve (Fed) seem to keep the fears of the recession on the table.

“Many policymakers saw a growing probability that they will need to take the rate into "restrictive territory", jargon for a level of rates that causes the economy to slow, at 2% or above,” mentioned Reuters while quoting five sources. Among them, comments from Bundesbank President and ECB  Governing Council member Joachim Nagel and Bank of Greece Governor Yannis Stournaras seem to gain major attention.

On the other hand, Federal Reserve Governor Christopher Waller was the prominent one as he said on Friday that he supports another significant hike in two weeks. On the same line was Kansas City Fed President Esther George who said, as reported by Reuters, “Case for continuing to remove policy accommodation is clear cut.” Furthermore, Cleveland Federal Reserve Bank President Loretta Mester said, “One inflation report is insufficient to alter one's outlook.” The policymaker also stated that he sees policy rates rising slightly above 4% by early 2023.

Elsewhere, US Treasury Secretary Yellen’s comments suggesting more pain for the US consumers due to the energy crisis and headlines suggesting US President Joe Biden’s readiness to increase hardships for Chinese chipmakers seem to challenge the previous optimism. Furthermore, fears that Russia could retaliate with greater strength after witnessing the retreat of some Moscow-backed militaries in Ukraine, also weigh on the XAU/USD prices.

It’s worth noting, however, that the absence of Chinese traders from the market and a light calendar, as well as the blackout period of the Fed policymakers ahead of September’s Federal Open Market Committee (FOMC) meeting test the intraday traders of the metal.

Looking forward, the US Consumer Price Index (CPI) and Retail Sales for August, as well as the preliminary readings of the Michigan Consumer Sentiment Index for September, will be important for fresh directions.

Technical analysis

A clear break of an upward sloping support trend line from the last Wednesday, now resistance around $1,720, directs gold price towards the $1,700 threshold.

However, an upward sloping support line from July 21, close to $1,690, could challenge the XAU/USD bears before directing them towards the yearly low surrounding $1,680.

Meanwhile, gold buyers have a bumpy road to return even if they manage to cross the $1,720 immediate hurdle.

That said, a descending resistance line from mid-August precedes the 100-SMA, respectively around $1,724 and $1,727, to limit the short-term upside of the metal. Following that, a weekly resistance line and the 200-SMA, close to $1,731 and $1,751, will gain the market’s attention.

Gold: Four-hour chart

Trend: Limited downside expected