Gold Price Forecast: XAU/USD bulls need validation from $1,902 and US inflation expectations

• Gold price remains mildly bid around eight-month high.
• Mixed concerns, wait for more clues to raise bets on Fed policy pivot probe XAU/USD bulls.
• China trade numbers, US Michigan CSI also appear important for fresh impulse.

Gold price (XAU/USD) remains steady around $1,900 as bulls take a breather around the eight-month high during early Friday, following the US inflation-inspired rally. In doing so, the yellow metal also portrays the market’s cautious mood ahead of more clues for the US inflation conditions and consumer sentiment. Additionally, the fresh fears surrounding the US-China ties act as additional challenges for the XAU/USD buyers.

That said, Reuters cites anonymous sources to state that the White House will discuss a recent crackdown on exports of chip-making tools to China with Japanese and Dutch officials during upcoming visits. The news also mentions that the White House Officials will not result in "immediate" pledges from the two countries to impose similar curbs. The news refreshes the geopolitical tussles between the United States and China and puts a floor under the Gold price.

On the same line could be the cautious mood ahead of China’s trade numbers for December and the first prints of the US Michigan Consumer Sentiment Index (CSI) for January will be important for immediate direction. Also important will be the US 5-year Consumer Inflation Expectations.

While portraying the mood the S&P 500 Futures remains indecisive even if Wall Street closed with gains while the US 10-year Treasury yields lick its wounds near 3.46% by the press time.

On Thursday, the US CPI matched 6.5% YoY forecasts for December, versus 7.1% prior. More importantly, CPI ex Food & Energy also proved the market consensus of 5.7% YoY figure right, compared to 6.0% previous readings. It’s worth noting that the CPI MoM marked the first negative figure since June 2020 while marking a -0.1% figure for the stated month, versus 0.0% forecast and 0.1% prior.

Following the US CPI, the Fed Fund Futures tied to the policy rate implied a nearly 100% chance of a 0.25% Fed rate hike in February while the odds favoring a 50 bps rate hike in the said month slumped to 8.0%.

Talking about the Fedspeak, Federal Reserve Bank of Philadelphia President Patrick Harker was the first to flag easy rate hikes after the US CPI and weighed on the US Dollar. On the same line, Richmond Federal Reserve President Thomas Barkin mentioned that it "makes sense" to steer more deliberately as the Fed works to bring inflation down. However, St. Louis Federal Reserve leader James Bullard also said that the most likely scenario is inflation remaining above 2%, so the policy rate will need to be higher for longer.

Looking forward, anticipated strength in China trade numbers for December could help Gold buyers but likely improvement in the US consumer confidence figures might probe the XAU/USD upside. It’s worth noting that the US 5-year Consumer Inflation Expectations will be crucial to watch.

Gold price technical analysis

Gold price pokes the top line of a three-week-old bullish channel as the RSI (14) line stays inside the overbought territory, which in turn suggests the metal’s pullback towards a one-week-old support line, close to $1,880 by the press time.

However, the lower line of the stated channel and the one-month-old horizontal support area, respectively near $1,855 and $1,825, could challenge the Gold bears afterward.

Alternatively, the stated channel's top near $1,901 and the previous day's high near $1,902 restricts the metal's immediate upside. That said, highs marked during May and late April 2022, respectively near $1,910 and $1,920, could act as additional resistances to watch for the yellow metal traders.

In a case where the Gold buyers keep the reins past $1,920, the odds of witnessing a run-up towards the late March 2022 high near $1,966 can’t be ruled out.

Overall, Gold buyers seem to run out of steam but the bears are nowhere to find.

Gold price: Four-hour chart

Trend: Pullback expected