Gold Price Forecast: XAU/USD eyes further upside ahead of China, United States inflation

• Gold price remains inactive but defends the bull pennant chart formation.
• Federal Reserve Chairman Jerome Powell’s failure to provide monetary policy signals underpin XAU/USD upside.
• Bullish chart pattern, World Bank economic forecasts add strength to the Gold price even if US Dollar probes buyers.
• Strong inflation from China, United States could challenge XAU/USD buyers.

Gold price (XAU/USD) portrays the typical pre-data anxiety as it makes rounds to $1,875 during early Wednesday, probing a three-day uptrend around the highest levels since May 2022. In doing so, the yellow metal portrays the market’s confidence in the traditional safe-haven even if the US Dollar rebounds from a multi-day low. The reason could be linked to the uncertainty surrounding the next moves of the US Federal Reserve (Fed) and downbeat economic forecasts from the World Bank (WB), not to forget cautious optimism surrounding China.

Federal Reserve Chairman Jerome Powell favored Gold buyers

Federal Reserve (Fed) Chair Jerome Powell's comments at Riksbank's International Symposium on Central Bank Independence couldn’t offer further clarity on the US central bank’s monetary policy outlook and propelled the rush towards the Gold amid uncertainty. The policymaker highlighted the Fed’s autonomous nature and no obligation towards climate control while praising the US central bank’s latest moves in his latest public appearances. It’s worth noting that Federal Reserve Governor Michelle Bowman appeared hawkish while stating that more rate rises are needed to combat high inflation, which in turn should have probed the XAU/USD bulls afterward.

It’s worth mentioning that the recently easing hawkish bets on the Fed’s next moves, as well as softer US data, seem to keep the Gold buyers hopeful even if the Federal Reserve policymakers try to defend the restrictive monetary policy. On Tuesday, the US NFIB Business Optimism Index for December dropped to the lowest levels since 2013 if ignoring multiple jitters during the global Covid wave. Further, US Wholesale Inventories also remained unchanged with 1.0% growth for November.

Alternatively, a rebound in the US Dollar Index (DXY) from the seven-month low seems to challenge the Gold price, due to the inverse relationship between the XAU/USD and the greenback’s gauge versus the six major currencies. It should be noted that the DXY snapped a two-day downtrend on Tuesday while bouncing off the multiday low to close around 103.30. In doing so, the US Dollar Index traced the firmer US Treasury bond yields which rose 10 basis points (bps) to 3.61%.

World Bank economic forecasts propel rush towards XAU/USD

On Tuesday, the World Bank (WB) came out with its revised economic forecasts and propelled the rush towards the traditional safe haven Gold. The quest for the yellow metal became more intense amid uncertainty surrounding the next moves of the major central banks considering the recently easy data and looming inflation woes.

That said, the WB stated that it expects the global economy to grow by 1.7% in 2023, down sharply from 3% in June's forecast, as reported by Reuters. The Washington-based institute also raised fears of global recession by citing the scale of recent slowdowns.

Inflation is the key for Gold traders

To overcome the latest inaction, Gold traders should pay attention to the inflation data from China and the US. Although the US Consumer Price Index (CPI) becomes more important, Beijing’s status as one of the key Gold consumers, as well as the recent reopening of the dragon nation, highlights China's CPI as the key for the XAU/USD traders.

That said, firmer prints of these inflation numbers should challenge the Gold buyers while backing hopes of higher rates. However, the People’s Bank of China’s (PBOC) favor for easy money policies could let the XAU/USD remain firmer even if China's CPI rises a bit.

Gold price technical analysis

Gold price portrays a bull pennant price formation on the hourly chart, which in turn can suggest the metal’s further rise towards the theoretical target price of $1,930.

The above 50 level of the Relative Strength Index (RSI) line, placed at 14, as well as the looming bull cross on the Moving Average Convergence and Divergence (MACD) indicator, also tease XAU/USD buyers despite recent inaction.

It’s worth noting, however, that the upper line of a three-week-old ascending trend channel, close to $1,890 by the press time, will precede the $1,900 threshold to challenge the Gold buyers before directing them toward the $1,930 theoretical target.

Alternatively, the previous weekly top surrounding $1,865 appears to be the immediate support to watch during the XAU/USD declines.

However, the bearish bias remains off the table unless the Gold price stays inside the aforementioned channel, currently between $1,842 and $1,865. Also adding strength to the $1,842 support is the 200-Hour Moving Average (HMA).

Overall, Gold price appears lucrative for the buyers due to the bull pennant confirmation and upward-sloping trend channel pattern.

Gold price: Hourly chart

Trend: Further upside expected