Gold Price Forecast: XAU/USD bears aim for $1,660 amid sluggish DXY ahead of US Retail Sales

• Gold price remains pressured towards short-term key support line.
• Market sentiment remains devided, favoring the US dollar’s safe-haven demand.
• Cautious mood ahead of important data/events restricts immediate moves.
• US Retail Sales, China inflation could entertain traders ahead of next week’s Fed meeting.

Gold price (XAU/USD) remains pressured at around $1,696, struggling to extend the two-day downtrend, as traders await key US data during Thursday’s Asian session. In addition to the wait for the macro, mixed concerns surrounding the key risk catalysts also seem to challenge the XAU/USD momentum traders.

That said, hawkish comments from the ECB policymakers jostled with the softer US inflation data to confuse the metal traders. On the same line could be China’s readiness for more stimulus and the Sino-American tussles. It should be noted that the Sino-American tension and the Ukraine-Russia war are extra filters to the XAU/USD moves. Above all, the market’s indecision ahead of the next week’s Federal Open Market Committee (FOMC) seems to restrict the gold price moves.

After marking a surprisingly easy US Consumer Price Index (CPI), US Producer Price Index (PPI) declined to 8.7% YoY in August from 9.8% in July, versus 8.8% market forecasts. Details suggest that the PPI ex Food & Energy, better known as Core PPI, also eased to 7.3% YoY from 7.6% but surpassed the market expectation of 7.1%.

On the other hand, Eurozone’s Industrial Production fell 2.3% MoM in July versus the 1.0% expected contraction.

Moving on, ECB policymaker Robert Holzmann has stated that the central bank's rates will be higher in a year but hikes will be data-dependent. Before that, ECB’s Constantinos Herodotou said, “ECB’s latest decision to hike the key rates does not mean there has been a forgone conclusion on the final level of interest rate.” Above all, ECB Chief Economist Philip Lane said on Wednesday that the current transition will require the ECB to continue to raise interest rates over the next several meetings, as reported by Reuters.

Elsewhere, the European Commission announced on Wednesday that it proposed a voluntary target for European Union countries to cut overall monthly electricity use by 10% compared to the same period in recent years, as reported by Reuters. “EU proposes windfall levy to claw back surplus profits from fossil fuel companies,” the news also mentioned.

Amid these plays, the Wall Street benchmarks printed mild gains while the Treasury yields retreated from the multi-day high, posting mild losses at the end.

Looking forward, the US Retail Sales for August, expected to remain unchanged at 0.0%, will be important to watch for clear intraday directions. Also important will be the market bets on the Fed’s next moves, especially after the recently mixed inflation data. It should be noted that the firmer US data may help the XAU/USD bears to keep reins.

Technical analysis

Bearish MACD signals join descending RSI (14), not oversold, to keep XAU/USD sellers hopeful of breaking an upward sloping support line from July 24, close to $1,690 by the press time.

Following that, the yearly low near $1,680 and the 61.8% Fibonacci Expansion of the metal’s moves between mid-August and September 13, around $1,660, will gain the gold bear’s attention.

It should be noted that the XAU/USD weakness past $1,660 may be challenged by the likely oversold RSI around then, if not then the metal’s slump towards the $1,600 threshold can’t be ruled out.

Alternatively, recovery moves may initially aim for the 100-SMA hurdle surrounding $1,721, a break of which could direct gold buyers towards the weekly peak near $1,735.

In a case where the XAU/USD price remains firmer past $1,735, the odds of witnessing a run-up towards the late August swing high near $1,765 can’t be ruled out.

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Trend: Further weakness expected