Gold Price Forecast: XAU/USD remains vulnerable near two-week low amid resurgent USD demand

• Gold turns lower for the second straight day amid the emergence of fresh USD buying.
• Bets for more aggressive Fed rate hikes help the USD to stall the post-US CPI decline.
• The anti-risk flow could lend support to the XAU/USD ahead of the US economic data.

Gold struggles to capitalize on the previous day's late recovery move and attracts fresh selling near the $1,671-$1,672 region on Friday. The intraday selling picks up pace during the first half of the European session and drags the XAU/USD back towards the $1,650 area.

Following the previous day's dramatic turnaround from the post-US CPI swing high, the US dollar makes a solid comeback from a fresh weekly low and exerts downward pressure on the dollar-denominated gold. The strong US consumer inflation figures reaffirmed expectations that the Fed will stick to its aggressive policy tightening path.

In fact, the current market pricing indicates a greater chance of yet another supersized 75 bps rate hike at the November FOMC meeting. This is seen as another factor weighing on the non-yielding yellow metal for the second straight day. That said, a turnaround in the risk sentiment could limit losses for the safe-haven gold.

The early optimism in the financial markets fades rather quickly amid concerns about economic headwinds stemming from rapidly rising borrowing costs and geopolitical risks. Adding to this, fresh COVID-19 lockdowns in China add to growing worries about the looming recession and trigger a fresh leg down in the equity markets.

From a technical perspective, a sustained break and acceptance below the $1,660 horizontal support could be seen as a fresh trigger for bearish traders. Hence, a slide back to the overnight swing low, around the $1,643-$1,642 area, remains a distinct possibility. Bears might eventually aim to challenge the YTD low near the $1,615 region.

Traders now look to the US monthly Retail Sales figures for a fresh impetus. The US economic docket also features the release of the Prelim Michigan Consumer Sentiment and Inflation Expectations Index. This, along with speeches by Fed officials, will influence the USD and produce short-term trading opportunities around gold.

Technical levels to watch