Gold Price Forecast: XAU/USD retreats from two-week high, still well bid around $1,725 area

• Gold climbs to a nearly two-week high, tough lacks follow-through buying.
• The risk-on impulse, a modest USD recovery act as a headwind for the metal.
• Sliding US bond yields cap the USD bounce and continues to offer support.
• Investors await the US CPI report on Tuesday for a fresh directional impetus.

Gold trims a part of its intraday gains to a nearly two-week high touched in the last hour and eases to the $1,725 area during the early North American session. The XAU/USD, however, manages to hold in the positive territory for the second straight day and remains at the mercy of the USD price dynamics.

A combination of factors fails to assist gold to capitalize on its early positive move and prompts some selling near the $1,733-$1,734 area on Monday. The risk-on impulse, as depicted by a generally positive tone around the equity markets, acts as a headwind for the safe-haven precious metal. Furthermore, a modest US dollar recovery from a fresh monthly low also contributes to capping the dollar-denominated commodity.

Adding to this, the prospects for a more aggressive policy tightening by major central banks force the non-yielding gold to retreat from the daily peak. That said, retreating US Treasury bond yields weighs on the USD. This, along with growing recession fears, amid economic headwinds stemming from COVID-19 curbs in China and the protracted Russia-Ukraine war, continues to lend some support to the safe-haven XAU/USD.

The mixed fundamental backdrop makes it prudent to wait for strong follow-through buying before traders start positioning for some meaningful upside for gold. In the absence of any major market-moving economic data from the US, the US bond yields will drive the USD demand. This, along with the broader risk sentiment, could produce short-term opportunities around gold ahead of the US consumer inflation figures on Tuesday.

The crucial US CPI report will play a key role in influencing the Fed's policy outlook and dictate the near-term USD trend. This, in turn, will help investors to determine the next leg of a directional move for gold. Heading into the key releases, traders might refrain from placing aggressive bets and prefer to move to the sidelines. This, in turn, could lead to a further consolidative price move for the XAU/USD.

Technical levels to watch