Gold Price Forecast: XAU/USD at a critical juncture, awaits US inflation for next big move

• Gold extends the rebound to test the critical resistance level at $1,792.
• US dollar drops in tandem with yields, upbeat also undermine the greenback.
• The Golden cross is playing out for gold price but acceptance above $1,792 is key.

Gold price snapped the previous pullback and resumed the recovery from multi-week lows on Tuesday, marking a solid turnaround amid ongoing optimism over the new Omicron covid variant. Investors seemed less worried about a potential threat to the global economic recovery by the new strain, as scientific evidence suggested less severe effects. In the wake of the upbeat market mood, the safe-haven US dollar remained on the back foot, propelling gold price higher. Despite the uptick, gold price remained capped below the key $1,792 upside hurdle, as the two-year Treasury yields spiked in anticipation of Friday’s US inflation data. Wall Street cheers also limited gold’s advance, as it settled at $1,785 on Wednesday.

The market mood continues to improve mid-week, exerting downside pressure on the greenback while shoring up gold price to fresh weekly highs above $1,790. Despite the Omicron-related optimism, markets remain anxious ahead of the US inflation reading, reflective of the weakness in the Treasury yields across the curve. Weaker yields further boost the non-interest-bearing bullion. Early Wednesday, a South African study showed that Pfizer Inc.’s shot has shown to have partial effectiveness against the Omicron variant. Looking ahead, in absence of any first-tier US economic data, the Omicron-driven risk sentiment will continue to influence the bright metal. A sudden risk-off move across the market could bump up the dollar’s demand at the expense of gold.

Gold Price Chart - Technical outlook

Gold: Daily chart

The Golden Cross remains in play, as gold bulls test the powerful resistance – the confluence of the 100 and 200-Daily Moving Averages (DMA) at $1,792 amid the renewed upside.

The 14-day Relative Strength Index (RSI) is inching higher to probe the 50 level, suggesting that the tide could be turning in favor of the bulls.

However, daily closing above the key confluence is needed to unleash the additional recovery. A sustained move above the latter will put the upward-pointing 50-DMA at $1,795 to test.

The next crucial barrier awaits at the $1,800 level. Should the recovery sustain that a retest of the November 30 high at $1,809 would be inevitable.

On the flip side, immediate support is seen at the previous day’s low of $1,772. Friday’s low at $1,766 could then come to the rescue of gold bulls.

The crucial support is seen at the horizontal trendline at $1,760 will be the line in the sand for gold optimists.