Gold Price Forecast: XAU/USD climbs back closer to multi-month high ahead of US PCE data

• Gold price rallies back closer to a three-month high amid sustained US Dollar selling.
• Federal Reserve Chair Powell’s dovish comments continue to weigh on Greenback.
• Sliding US Treasury bond yields further contribute to driving flows toward XAU/USD.
• Traders now await the Fed’s preferred inflation gauge for some meaningful impetus.

Gold price gains traction for the third successive day on Thursday and climbs to over a two-week high during the mid-European session. The XAU/USD is currently placed just above the $1,780 level, with bulls eyeing a move beyond the three-month high touched in November.

Powell’s dovish remarks weigh on US Dollar and benefit Gold price

The US Dollar languished near a technically significant 200-day Simple Moving Average (SMA) in the wake of the overnight dovish remarks by Federal Reserve Chair Jerome Powell. A weaker Greenback turns out to be a key factor acting as a tailwind for the Dollar-denominated Gold price. Powell sent a clear message that the US central bank will soften its stance and said that it was time to moderate the pace of interest rate hikes.

Declining US Treasury bond yields provides an additional lift to XAU/USD

The prospects for a less aggressive policy tightening by the Federal Reserve contribute to an extension of the recent decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US Treasury note drops to a nearly two-month low, which continues to weigh on the US Dollar and further benefits the non-yielding Gold price. That said, uncertainty over peak interest rates in the United States might cap the XAU/USD.

US Personal Consumption Expenditures Price Index eyed for fresh impetus

In fact, Powell warned on Wednesday that interest rates could continue to rise to even higher levels than previously expected, largely due to stubbornly high inflation. Hence, the market focus shifts to the US Personal Consumption Expenditures (PCE) Price Index for November. The Federal Reserve's preferred inflation is expected to remain well above the 2% target, though signs of easing price pressures could dent the US Dollar and boost Gold price.

Thursday's US economic docket also features the release of ISM Manufacturing PMI. This, along with the US bond yields, might influence the USD price dynamics. Apart from this, the broader market risk sentiment should allow traders to grab short-term opportunities around Gold price ahead of the closely-watched US monthly jobs (NFP) on Friday.

Gold price technical outlook

From a technical perspective, momentum beyond the $1,785-$1,786 region should allow Gold price to reclaim the $1,800 psychological mark. The latter coincides with the very important 200-day SMA, which if cleared will be seen as a fresh trigger for bullish traders and set the stage for a further near-term appreciating move. The XAU/USD might then climb to the $1,807-$1,808 region before eventually rallying to the next relevant hurdle near the $1,820 area.

On the flip side, a meaningful slide back below the $1,775 level is likely to find decent support near the $1,762-$1,760 horizontal zone. Any further decline is more likely to attract fresh buyers around the $1,740 region. The latter should act as a strong base for Gold price, which if broken decisively will negate the positive outlook and shift the near-term bias in favour of bearish traders.

Key levels to watch