Gold Price Forecast: XAU/USD struggles around $2,020 as US Dollar Index defends downside

• Gold price is facing resistance in surpassing the immediate resistance of $2,020.00 amid the USD Index’s recovery.
• The USD Index has defended further downside as chances of a 25 bps rate hike for the May meeting are more than 68%.
• US core CPI has rebounded to 5.6% vs. 5.5% the former release as rent prices remained persistent.

Gold price (XAU/USD) has displayed exhaustion in the upside momentum after hitting the crucial resistance of $2,020.00 in the Tokyo session. The upside bias for the precious metal is still solid as the impact of deceleration in the United States inflation would stay for longer. The US Dollar Index (DXY) has shown some defense after testing its critical low of 101.44 as the lower US Consumer Price Index (CPI) has failed to recede chances of consecutive 25 basis points (bps) rate hike from the Federal Reserve (Fed).

As per the CME Fedwatch tool, the chances of a 25 bps rate hike for the May monetary policy meeting are more than 68%.

Meanwhile, S&P500 futures have extended their gains after a bearish settlement on Wednesday, indicating a recovery in the risk-on mood.

A scrutiny of the US inflation report indicates that headline inflation has softened more than expectations to 5.0%, which was the outcome of weaker gasoline prices. The investing community is aware of the fact that oil prices have significantly rebounded in April after a surprise announcement of production cuts by OPEC+, which could spoil Gold Bull’s party.

Contrary to the headline inflation, core CPI has rebounded to 5.6% vs. 5.5% the former release as rent prices remained persistent. This indicates that core inflation could remain extremely stubborn ahead.

San Francisco Fed Bank President Mary Daly said late Wednesday, "There's a lot more in the pipeline of monetary policy tightening," as reported by Reuters. However, she refrained from forecasting the end of the tightening cycle.

Gold technical analysis

Gold price is auctioning in a Symmetrical Triangle chart pattern on an hourly scale, which indicates a sheer volatility contraction after wild moves. The upward-sloping trendline of the chart pattern is placed from April 10 low at $1,986.28 while the downward-sloping trendline is plotted from April 05 high at $2,032.09.

The 20-period Exponential Moving Average (EMA) at $2,014.48 is providing a cushion to the Gold bulls.

Meanwhile, the Relative Strength Index (RSI) (14) has slipped into the 40.00-60.00 range from the bullish range of 60.00-80.00, indicating exhaustion in the uptrend.

Gold hourly chart