Gold Price Forecast: XAUUSD drops towards $1,650 amid risk-off mood, US inflation, China eyed

• Gold price retreat from monthly high, pares the biggest daily jump since March 2020.
• Headlines surrounding China, Russia weigh on sentiment following a risk-on day.
• Mixed US jobs report, Fedspeak highlights this week US CPI as central bankers discuss neutral rates.
• Sour sentiment can favor XAUUSD bears but softer US dollar could restrict the downside.

Gold price (XAUUSD) slides from a one-month high, flashed the previous day, amid sour sentiment. That said, the bullion refreshes an intraday low near $1,673 by the press time.

The market’s latest risk-aversion could be linked to the fresh fears of China’s covid controls, as well as geopolitical fears surrounding Russia. On the same line are the mixed concerns over the US Federal Reserve’s (Fed) next move, mainly due to the recently mixed US jobs report.

China’s National Health Commission (NHC) officials turned down the previous hopes of witnessing easy covid control as they said, per Reuters, that China will persevere with its "dynamic-clearing" approach to COVID-19 cases as soon as they emerge. The news also added that measures must be implemented more precisely and meet the needs of vulnerable people.

Additionally, China President Xi Jinping’s warning to Russian President Vladimir Putin over the usage of nuclear technology in the war against Ukraine also weighed on the sentiment and the XAUUSD prices. Furthermore, the news from the Wall Street Journal (WSJ) suggesting that a senior White House Official is involved in undisclosed talks with top Putin aides also tried to please the pair buyers.

The expectations of witnessing China’s retreat from the zero-covid policy joined mixed US job numbers and Fedspeak to drown the USDCHF prices the previous day. ''An unverified social media post last week, and a report authorities were working on plans to scrap a system that penalizes airlines for bringing virus cases into the country, boosted investor hopes that China’s pandemic policy may soon be loosened,'' Bloomberg reported. 

US Nonfarm Payrolls (NFP) for October arrived at 261K versus 200K expected and 315K upwardly revised prior. However, the Unemployment Rate surprised markets by rising to 3.7% compared to 3.5% previous readings and 3.6% market forecasts. Following the data, Richmond Fed President Thomas Barkin said that the US labor market was still tight while also mentioning, “Not sure I know what we'll do in December.” Boston Federal Reserve President Susan Collins said on Friday that it is time for the Fed to shift its focus from the size of rate hikes to the "ultimate "destination," as reported by Reuters. “Four Federal Reserve policymakers on Friday indicated they would still consider a smaller interest rate hike at their next policy meeting despite strong jobs data,” mentioned Reuters.

While portraying the mood, Wall Street benchmarks closed positive and so did the US Treasury yields. However, the US Dollar Index (DXY) was down and propelled prices of commodities and Antipodeans. It’s worth noting that S&P 500 Futures drop 0.55% intraday at the latest.

Looking forward, headlines surrounding China’s covid restrictions and the US Consumer Price Index (CPI) for October will be crucial to watch for clear directions.

Technical analysis

Gold price pulls back from a three-month-old descending resistance line as sellers attach the 50-DMA support near $1,675, a break of which could quickly direct the bears towards the 21-DMA level of $1,653.

However, a five-week-old horizontal support zone near $1,615-17 appears the key for the XAUUSD bears to track past $1,653 to aim for further downside.

Alternatively, a clear upside break of the aforementioned resistance line, near $1,681 at the latest, could target the $1,700 threshold before challenging the previous monthly peak near $1,730.

Overall, the latest pullback in the metal prices can keep the bears hopeful for another attempt to refresh the yearly low.

Gold price: Daily chart

Trend: Further downside expected