Gold Price Forecast: XAU/USD extends gains toward $1,920, focus on US economic data

• Gold price strengthens after China’s positive data and fresh fiscal stimulus.
• US Dollar (USD) has pulled back from its six-month high; contributing support for the yellow metal.
• Enhanced US bond yields could offer support in constraining the correction of the US Dollar (USD).

Gold price extends gains on the second day, trading higher near $1,920 per troy ounce during the early trading hours of the European session on Friday. The pair is receiving upward support, likely attributed to a slight correction in the US Dollar (USD).

Additionally, the positive data released by the National Bureau of Statistics (NBS) in China reveals encouraging economic trends. The market optimism could provide support in underpinning the prices of Gold, coupled with the recent move by the People's Bank of China (PBoC) to lower the Reserve Requirement Ratio (RRR) by 25 basis points (bps).

China’s Retail Sales (YoY) grew by 4.6%, surpassing expectations of a 3.0% increase in August and demonstrating an improvement from the previous month's 2.5% figure. Moreover, Industrial Production outperformed estimates by showing a growth rate of 4.5% in August, compared to a 3.7% rise in July.

US Dollar Index (DXY) has retreated from its recent six-month high, trading lower around 105.20. However, the likelihood of a substantial corrective decline in the Greenback seems restricted, largely due to market participants being cautious in response to the US Federal Reserve's (Fed) hawkish stance on monetary policy.

Furthermore, the US Treasury yields recovered the intraday losses, with the yield on 10-year US bond at 4.30% by the press time. The improved yields could provide support for the USD.

The anticipation of the Fed's dedication to a more stringent monetary policy, potentially involving additional interest rate hikes or tightening measures, is expected to discourage traders from placing bold positions on non-yield assets like yellow metal. Monetary policy decisions and the Fed's communications will remain focal points for buck movements in the near term.

Moreover, recent economic data from the United States has been generally positive. Initial Jobless Claims for the week ending September 8 were better than anticipated, with 220,000 new claimants. The report showed a slight improvement from the previous week's figure of 217,000.

Core Producer Price Index (PPI) for August matched expectations with a 2.2% increase, although it was slightly lower than the previous rate of a 2.4% hike. Retail Sales also exhibited improvement, rising to 0.6% compared to the previous month's 0.5%, surpassing market expectations that had predicted a slowdown to 0.2%.

These data figures collectively suggest a relatively healthy economic environment in the US, which can have an impact on market sentiment and influence trading decisions.

Market participants will closely monitor the release of the US preliminary Michigan Consumer Sentiment Index during the North American session. The consensus expectation is for a minor decline from a previous reading of 69.5 to 69.1.