Gold Price Forecast: Will XAU/USD recapture 21-day SMA on weak US data?

Gold price is trading close to the highest level so far this week near $1,971 early Wednesday, unperturbed by the risk-rally on the global stock markets, a minor bounce in the United States Dollar (USD) and the US Treasury bond yields. The revival of the dovish US Federal Reserve (Fed) policy expectations remains the primary factor underpinning Gold price.  

US Retail Sales and Producer Price Index data in focus

On Tuesday, the high-impact US Consumer Price Index (CPI) data came in softer-than-expected and reinforced expectations that the Federal Reserve is done hiking interest rates, smashing the US Treasury bond yields across the curve. The US headline annual CPI rose 3.2% in October, down from the 3.7% increase reported previously. The Core inflation fell to 4.0% YoY in the reported period, as against a 4.1% rise seen in September. The monthly inflation figures also cooled down more than expected in October, helping completely take Fed interest rate hike expectations off the table.

The US Dollar tumbled to two-month lows against its major peers, tracking the sell-off in the US Treasury bond yields, spiking up Gold price to five-day highs of $1,971, nearly up $20 on the day. Markets began pricing increased chances of a Fed rate cut as early as May next year, downing the 10-year benchmark US Treasury bond yields back below the 4.50% key level. A dovish shift in the Fed’s policy outlook bolstered the non-interest-bearing Gold price.

In Wednesday’s trading so far, Gold price is looking to build on the previous upsurge, in part helped by the renewed Chinese optimism. Encouraging China’s Retail Sales and Industrial Production data calmed fears over a slowdown in the world’s second-largest economy, boosting risk sentiment.

If risk flows gather steam later in the day, the US Dollar is likely to come under renewed selling pressure, providing extra legs to the Gold price advance. Further, Gold price could also find fresh support on a potential disappointment in the US Retail Sales and Producer Price Index (PPI) data due for release on Wednesday at 13:30 GMT. US consumer spending and factory gate prices are seen dropping in the reported period.  

Also, all eyes will remain on the highly-anticipated meeting between Chinese President Xi Jinping and US. President Joe Biden in  San Francisco, on the sidelines of the Asia-Pacific Economic Cooperation (APEC) Economic Leaders' meeting.

Gold price technical analysis: Daily chart

The Gold price rebound from the critical 200-day Simple Moving Average (SMA) at $1,935 on Monday found extra legs a day before, enabling the bright metal to retest the 21-day SMA at $1,973.

The 14-day Relative Strength Index (RSI) pierced through the 50 level, swinging back into bullish territory, suggesting that Gold buyers are likely to remain in control.

Daily closing above the 21-day SMA at $1,973 is critical to unleashing further upside toward the $1,980 round number. The next relevant upside barrier is placed at the November 6 high of $1,993, above which the $2,000 mark will come into play.  

On the other hand, any pullback from the weekly high could test initial demand around $1,960, below which the $1,950 psychological level will be on sellers' radars.

The 200-day SMA at $1,935 could be the last line of defense for Gold buyers.