Gold Price Forecast: XAU/USD jostles with $1,730 hurdle ahead of US inflation

• Gold price remains firmer around fortnight high, pokes 21-DMA resistance.
• Risk-on mood, softer US dollar underpin XAU/USD recovery ahead of the key US CPI.
• Headlines surrounding Russia, light calendar and stimulus hopes favored risk-on mood.
• Firmer US inflation data could recall US dollar bulls but absence of Fedspeak may restrict the fall.

Gold price (XAU/USD) grinds higher around a fortnight top after a two-day uptrend to $1,725 as traders await the all-important US Consumer Price Index (CPI) on Tuesday. The metal’s latest gains could be linked to the market’s optimism and likely preparations for today’s inflation numbers.

Chatters that Ukraine is gaining success in pushing back the Russian military from some of its battlegrounds seem to have underpinned the market’s cautious optimism, even as the same raised the fears of Russia’s harsh retaliation. On the same line could be the hopes of more stimulus from major economies like China, the US, the UK and Europe. It’s worth noting that a holiday in China and a light calendar could also be linked to the XAU/USD’s rebound as the absence of covid/economic woes from Beijing may have helped the metal prices. Furthermore, the latest news from the Wall Street Journal (WSJ) suggesting that the US gas prices are down for the 13^th consecutive week also eased the market’s pressure and favored the risk-on mood, as well as the gold price.

Elsewhere, the policymakers from the US Federal Reserve and the European Central Bank (ECB) remain hawkish but the recent softening of the headline economics and the inflation expectations seemed to have pushed back the gold bears amid a light calendar.

Amid these plays, Wall Street printed another day of gains even as the US Treasury yields were on the rise, up five basis points (bps) to 3.36% at the latest. The same weighed on the US Dollar Index (DXY) and drowned the greenback gauge towards printing the four-day downtrend.

Moving on, US CPI for August becomes crucial after the latest softness in the price pressure. The forecasts suggest the headline number ease to -0.1% MoM versus 0.0% prior while the CPI ex Food & Energy is likely to remain unchanged at 0.3% MoM. If the inflation numbers arrive softer the US dollar may have a further downside to track, which in turn can help the XAU/USD to remain firmer.

Also read: Gold forms a reversal

Technical analysis

Gold justifies an impending bull cross on the MACD and a price-positive trend line breakout of the RSI (14) as it pokes the 21-DMA hurdle surrounding $1,731.

With this, the XAU/USD prices are likely to overcome the immediate DMA resistance and aim for the 38.2% Fibonacci retracement level of April-July downside, near $1,756.

However, the metal’s upside past $1,756 appears doubtful as a three-month-old descending resistance line could challenge the gold buyers at around $1,768.

On the contrary, multiple supports around the $1,700 threshold could challenge the pair’s downside moves ahead of directing XAU/USD bears towards the yearly low near $1,680.

Following that, the 61.8% Fibonacci Expansion (FE) of the metal’s moves from late April to early August, around $1,660, will be in focus.

Gold: Daily chart

Trend: Further recovery expected