Gold Price Forecast: XAU/USD bulls cheer softer yields to approach $1,885 hurdle

• Gold prices extend the previous day’s bounce off $1,835 support confluence.
• Yields print four-day downtrend as mixed Fedspeak supersedes hot inflation.
• Absence of major headlines allows traders to consolidate recent losses.
• Gold Price Forecast: Sentiment continues to favor the greenback

Gold (XAU/USD) prices pick up bids to renew intraday high around $1,858, stretching the previous day’s recovery during Thursday’s Asian session. The metal’s latest run-up could be linked to the softer US Treasury yields, as well as downbeat US Dollar Index (DXY) performance as traders seem running out of fuel to cheer the hawkish Fed, despite firmer US inflation data.

That said, the US 10-year Treasury yields dropped 1.4 basis points (bps) to 2.92%, around a two-week low by the press time. In doing so, the benchmark bond coupons drop for the fourth consecutive day.

The yields failed to cheer higher-than-expected US inflation data as the Fedspeak turned out mixed of late. That said, the headline Consumer Price Index (CPI) rose to 8.3% YoY versus 8.1% expected and 8.5% prior. More importantly, the CPI ex Food & Energy, better known as Core CPI, crossed 6.0% forecasts with 6.2% annual figures, versus 6.5% previous readouts.

Following the data, Fedspeak turned out to be mixed as the previously hawkish Federal Reserve Bank of St. Louis James Bullard mentioned that he ''won't emphasize single inflation report too much but inflation is more persistent than many have thought.'' However, Cleveland Fed President and FOMC member Loretta Mester previously recalled the bears as she said, “They don't rule out a 75 basis points rate hike forever”. 

Against this backdrop, the DXY prints mild losses and the US stock futures rise around 0.30% amid sluggish markets.

Looking forward, weekly prints of the US Jobless Claims and monthly Producer Price Index (PPI) will decorate today’s calendar and hence major attention will be given to the qualitative catalysts for clear directions. Considering the recent consolidation in the market moves, the gold prices are likely to benefit from the softer yields and the US dollar pullback.

Technical analysis

Gold prices remain on the front foot, justifying Thursday’s rebound from a convergence of the 200-DMA, ascending trend line from August 2021 and 61.8% Fibonacci retracement of August 2021 to March 2022 upside.

Also keeping buyers hopeful is the recently improving RSI (14) line and easing the bearish bias of the MACD signals.

As a result, gold buyers are likely heading towards a confluence of the 100-DMA and a downward sloping trend line from April 21, near $1,885.

However, any further upside past-$1,885 will need validation from March’s low near $1,890 before calling XAU/USD bulls to attack $1,900.

Alternatively, pullback remains elusive beyond the $1,835 support confluence, a break of which won’t hesitate to direct gold prices towards the yearly low near $1,780.

Gold: Daily chart

Trend: Further recovery expected