Gold Price Forecast: XAU/USD drops to $1,900, eyes multi-month low ahead of US inflation data

• Gold price fails to build on the overnight bounce and comes under fresh selling pressure on Friday.
• Hawkish central banks, along with a bullish US Dollar, continue to act as a headwind for the metal.
• Investors now look to the US Core PCE Price Index to determine the next leg of a directional move.

Gold price meets with a fresh supply on the last day of the week and extends its steady intraday descent through the early part of the European session. The XAU/USD currently trades around the $1,900 round-figure mark, down nearly 0.40% for the day, and remains well within the striking distance of its lowest level since mid-March touched on Thursday.

A more hawkish stance adopted by major central banks and the prospects for further rate increases continue to act as a headwind for the non-yielding Gold price. Apart from this, the emergence of fresh US Dollar buying turns out to be another factor driving flows away from the XAU/USD. In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, climbs to a fresh two-and-half-week high in the last hour and continues to draw support from expectations for further policy tightening by the Federal Reserve (Fed).

It is worth recalling that the US central bank had signalled that borrowing costs may still need to rise as much as 50 bps by the end of this year. Adding to this, the upbeat US macro data released on Thursday reaffirmed market bets for a 25 bps lift-off at the next FOMC policy meeting on July 25-26. Furthermore, Fed Chair Jerome Powell said earlier this week that he does not see inflation coming down to the Fed's 2% target until 2025. This, in turn, continues to push the US Treasury bond yields higher and lends support to the USD.

It, however, remains to be seen if the USD bulls can maintain their dominant position or opt to take some profits off the table ahead of the release of the US Core PCE Price Index - the Fed's preferred inflation gauge. The crucial data is due later during the early North American session and influence expectations about the future rate-hike path. This, in turn, will drive the USD demand and provide a fresh directional impetus to Gold price, which seems poised to end the quarter in the negative territory for the first time since September 2022.

Technical levels to watch