Gold Price Forecast: Will US inflation trigger a sustained move above $1,834 in XAU/USD?

Gold price off highs but its bullish potential remains intact.
US inflation eyed for hints on the timing of the Fed rate hike.
Gold price needs a daily close above $1,834 to extend the technical breakout.

Dhwani Mehta FXStreet

The buying interest around gold price remained unabated on Tuesday, as the bright metal refreshed two-month highs at $1,833, falling a thread-line short of the September highs of $1,834. Gold price extended its bullish momentum into a fourth straight day, as the US dollar continued its corrective downside, tracking the persistent weakness in the Treasury yields across the curve. Investors weighed in the global central bankers’ reluctance to signal a rate hike amid growing inflation worries, which underpinned the underlying bullish tone in gold price. Additionally, the passage of the US $1 trillion infrastructure bill provided the much-need tailwind to gold’s upsurge. Gold jumped nearly 2% last Friday on the Fed’s and the Bank of England’s (BOE) dovish stance.

Gold price is retreating in the lead-up to the US inflation showdown, which is eagerly awaited by the markets for any hints on the Fed’s rate hike timing, as well as, its pace of tapering in the coming months. The metal is easing from two-month tops, as the US dollar has caught a fresh bid amid escalating inflation concerns, especially after the Chinese Consumer Price Index (CPI) and Producer Price Index (PPI) jumped amid power crunch. Record high Chinese PPI intensified the risk-off mood, lifting the safe-haven demand for the greenback. All eyes now remain on the US inflation figures for the next decisive move in gold price. The US CPI is expected to arrive at 5.3% YoY in October vs. 5.4% previous while the core figure is seen steady at 4% in the reported period.

Gold Price Chart - Technical outlook

Gold: Daily chart

Gold price has turned south after running into strong offers on a couple of occasions just below the September highs.

The latest leg lower can be associated with the downtick in the 14-day Relative Strength Index (RSI). With the leading indicator, however, still holding comfortably above the 50.00 level, gold’s bullish potential remains well in place.

Adding credence to the bullish bias, a bull cross, represented by the 21-Daily Moving Average (DMA) having pierced the 200-DMA from below, remains in play.

Gold bulls need a daily closing above the $1,834 barrier to unleash the further upside. The next stop for gold buyers is seen at the $1,840 round number, above which the June 16 high of $1,853 could likely be tested.

Should the bears manage to defend the September tops, the further retracement towards Tuesday’s low of $1819 could be in the offing.

Further south, symmetrical triangle resistance-turned-support at $1,806 will emerge as a powerful support.

Note that gold price yielded an upside breakout from the symmetrical triangle formation last Friday.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

GBP/USD approaches May highs near 1.3650 on renewed USD selling

GBP/USD approaches the May high, while trading near 1.3650 in the European session on Thursday. The US Dollar slips again even as markets assess whether the US Treasury buyback will be a game-changer. Attention now remains on US data and Middle East headlines for further trading impetus.

EUR/USD hits fresh three-month highs above 1.1700

EUR/USD is at its highest level in three months, above 1.1700, in European trading on Thursday. The pair regains traction as the US Dollar resumes its downside, led by the US Treasury's bond buyback plan.. US Jobless Claims data are next in focus amid lingering Iran risks.

Gold stays in red below $4,500 despite resurgent USD supply

Gold sticks to modest intraday losses and remains below the $4,500 mark in the European session on Thursday. Despite geopolitical uncertainties, the US Dollar loses ground again, resuming the previous day’s slump to a three-month low.

Bitcoin extends gains above $71,000 as liquidity conditions improve

Bitcoin extends its gains, inching toward $72,000 on Thursday, as crypto markets continue to cheer the US Treasury’s decision to double its debt buyback operations. The move has sharply improved market sentiment and liquidity conditions, helped trigger a short squeeze, and overall provided a positive catalyst for the broader crypto market.

The bond coup

Yesterday was marked by a coup from the US Treasury, which suddenly announced that it will ‘at least double’ the maximum size of its buyback operations for longer-term debt, hoping to ease pressure on long-term yields and borrowing costs. Phoah! The markets reacted heavily to the news. The US 10-year yield fell sharply, while the 30-year yield dropped from its highest levels since 2007.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.