Gold Price Forecast: XAU/USD flirts with monthly low, seems vulnerable near $1,910 ahead of US CPI

• Gold price drifts lower for the second straight day and struggles near the monthly low.
• The emergence of some US Dollar buying drives flows away from the precious metal.
• Looming recession risks help limit losses for the XAU/USD ahead of the US CPI print.

Gold price remains under some selling pressure for the second successive day on Wednesday and languishes near the monthly low touched the previous day. The XAU/USD trades around the $1,910 level during the Asian session and seems poised to prolong the recent downfall from the $1,953 region, or a one-month peak, around set on September 1.

The US Dollar (USD) attracts fresh buying following Tuesday's good two-way price swings and is seen as a key factor undermining demand for the Gold price. Expectations that the Federal Reserve (Fed) will stick to its hawkish stance remain supportive of elevated US Treasury bond yields and continue to act as a tailwind for the Greenback. Market participants seem convinced that the Fed will keep interest rates higher for longer and have been pricing in the possibility of one more 25 basis points (bps) lift-off by the end of this year.

The bets were reaffirmed by the upbeat US macro data released last week, which pointed to a resilient economy. Furthermore, the fact, that inflation is not cooling fast enough supports prospects for further policy tightening by the Fed. Hence, the market focus remains glued to the US consumer inflation figures, due later during the early North American session. The crucial US Consumer Price Index (CPI) will influence expectations about the Fed's future rate-hike path and provide a fresh directional impetus to the non-yielding Gold price.

Any signs of sticky inflation might set the stage for the resumption of the USD's recent rally to a six-month peak and pave the way for a further depreciating move for the Gold price. That said, a generally softer risk tone might hold back bears from placing fresh bets around the safe-haven XAU/USD. The market sentiment remains fragile in the wake of concerns about the worsening economic conditions in China. Adding to this, worries about headwinds stemming from rapidly rising borrowing costs temper investors' appetite for riskier assets.

Nevertheless, the aforementioned fundamental backdrop seems tilted firmly in favour of bearish traders and suggests that the path of least resistance for the Gold price is to the downside. Moreover, the overnight breakdown and close below a technically significant 200-day Simple Moving Average (SMA) validate the negative outlook for the XAU/USD. Hence, any positive reaction to the US macro data might still be seen as a selling opportunity and run the risk of fizzling out rather quickly.

Technical levels to watch