Gold Price Forecast: XAU/USD steadies above $1,800 as US inflation amplifies Fed fears

• Gold price remains sidelined at the highest levels in six months.
• US inflation trimmed hawkish Fed bets but Chairman Powell isn’t a famous dove.
• Growth fears surrounding China, steady Treasury bond yields probe XAU/USD bulls.
• Gold bears need hawkish statements from Fed to return.

Gold price (XAU/USD) treads water around $1,810 as bulls take a breather following the biggest daily run-up in a fortnight near the highest levels since June, marked the previous day, during early Wednesday. In doing so, the yellow metal portrays the traders’ indecision amid mixed clues and anxiety ahead of the US Federal Reserve’s (Fed) monetary policy meeting.

The market’s indecision could be witnessed via the mildly bid US stock futures and the sluggish yields. That said, the S&P 500 Futures print a three-day uptrend near 4,065, up 0.25% intraday, whereas the US 10-year Treasury yields decline one basis point (bps) to 3.49%, after snapping the three-day downtrend.

The reason could be linked to the hopes of more stimulus from China, as officials from the Asian Development Bank (ADB) and the International Monetary Fund (IMF) appear less convinced by the dragon nation’s easing of the Zero-Covid policy and continue to highlight economic fears.

Alternatively, downbeat US inflation data, published on Tuesday, raised the hopes of easy rate increases from the Fed. That said, the US Consumer Price Index (CPI) marked the biggest retreat in over a year the previous day, which in turn suggests easing inflation fears and less pressure on the Federal Open Market Committee (FOMC).

As a result, Reuters said, “Fed funds futures prices implied a better-than-even chance that the Fed will follow its expected half-point interest-rate hike this week with a smaller 25-basis-point rate hike in February, ultimately raising rates no higher than the 4.5%-4.75% range in its battle to beat inflation,” said Reuters. The news also added that traders were betting on a second half-point hike in February before the inflation report.

It should, however, be noted that the latest round of the Fed talk has been hawkish and Fed Chairman Jerome Powell isn’t known for dovish moves and may defend the rate hike trajectory by citing the need for more policy tightening. Also acting as a challenge for the Gold buyers could be an upward revision to the US economic forecasts and expectations marking more than 50 bps rate hikes. It’s worth noting that the market expects the last 0.50% rate increase for today before the Fed starts 0.25% lifts to the rate in 2023.

Also read: Fed December Preview: Will US Dollar selloff continue?

Technical analysis

Gold price grinds between a one-week-old previous resistance line and an ascending trend line from resistance from November 15, respectively near $1,805 and $1,820, as traders await the Fed’s verdict.

In doing so, the precious metal also takes clues from the nearly overbought RSI and the bullish MACD signals.

It’s worth noting, however, that the bullion’s successful trading beyond the 100-SMA level surrounding $1,772 keeps the Gold buyers hopeful.

In a case where XAU/USD drops below $1,772, the $1,760 level may test the sellers before directing them to the late November swing low near $1,720.

Meanwhile, an upside clearance of the $1,820 hurdle will highlight tops marked in June 2022, around $1,880 and the $1,900 round figure for the Gold bulls.

Gold price four-hour chart

Trend: Limited upside expected