Gold Price Forecast: Bull-bear tug-of-war continues, focus remains on US CPI

Gold witnessed good two-way price moves on the first day of a new trading week, albeit lacked any firm direction and held in a familiar range. The US dollar was back in demand amid expectations that the Fed is moving towards tightening its monetary policy stance sooner. This, in turn, was seen as a key factor that exerted some pressure on the dollar-denominated commodity. It is worth recalling that the June FOMC meeting minutes released last Wednesday revealed that Fed officials agreed on the need to be ready to act if inflation or other risks materialize.

The greenback was further underpinned by a goodish rebound in the US Treasury bond yields, which was seen as another factor that drove flows away from the non-yielding yellow metal. Apart from this, a solid rebound in the US equity markets further acted as a headwind for traditional safe-haven assets, including gold. That said, worries about the economic fallout from the spread of the highly contagious Delta variant of the coronavirus helped limit any deeper losses, rather assisted the XAU/USD to reverse an intraday slide to multi-day lows.

The commodity finally settled above the $1,800 mark for the fourth straight session and gained some follow-through traction during the Asian session on Tuesday. The uptick was supported by a subdued USD price action, though a positive tone around the US Treasury bond yields might keep a lid on any further gains. Investors might also refrain from placing any aggressive bets, rather prefer to wait on the sidelines ahead of the latest US consumer inflation figures, due later today. The data may offer clues about the likely timing of tapering and interest rate hikes.

This will be followed by Fed Chair Jerome Powell's semi-annual congressional testimony on Wednesday and Thursday, which will be closely watched for his response to the inflation figures. This should influence market expectations about the Fed's near-term monetary policy outlook and play a key role in determining the next leg of a directional move for the metal. In the meantime, the broader market risk sentiment, the USD price dynamics and the US bond yields will be looked upon for some short-term trading opportunities around the commodity.

Technical outlook

From a technical perspective, nothing seems to have changed for the XAU/USD and the emergence of some dip-buying on Monday favours bullish traders. Meanwhile, the recent range-bound price action constitutes the formation of a rectangle on hourly charts. Given the recent strong rebound from two-and-half-month lows, the rectangle might still be categorized as a bullish continuation pattern. That said, it will still be prudent to wait for a sustained move beyond the monthly swing highs, around the $1,818 region, before positioning for any further appreciating move.

The commodity might then accelerate the momentum towards challenging the very important 200-day SMA, around the $1,828-29 zone. Some follow-through buying will be seen as a fresh trigger for bullish traders and push the commodity further beyond an intermediate barrier, around the $1,852-55 region, towards testing the next major hurdle near the $1,870 level.

On the flip side, dips below the $1,800 mark might continue to find decent support near the $1,792-90 area, which should act as a key pivotal point for intraday traders. A convincing break below might prompt some technical selling and pave the way for a slide towards the $1,780-78 support zone. Some follow-through selling below the $1,775 level will negate any near-term positive bias and turn the commodity vulnerable. The next relevant support is pegged near the $1,762-60 region, below which the XAU/USD could slide back to retest June monthly swing lows, around the $1,750 area.