Gold Price Forecast: XAU/USD buyers keep $1,880 in sight ahead of US PPI, Fed Minutes

• Gold price is gathering pace for the next push higher, with eyes on the $1,880 level.
• US Dollar weakens with bond yields on dovish Federal Reserve bets, upbeat mood.
• Gold price remains poised for a fresh upswing on a bullish 4-hour technical setup.

Gold price is extending its phase of bullish consolidation near the one-week high of $1,865 in Asian trading on Wednesday. Gold price is gathering pace for the next leg higher, as the United States Dollar (USD) licks its wounds amid a renewed downtick in the US Treasury bond yields across the curve.

Gold price awaits US PPI data, Fedspeak and Fed Minutes

The recent dovish shift in tone from the US Federal Reserve (Fed) policymakers has prompted traders to pare back their bets if one more rate hike by the world’s most powerful central bank by the year-end, with odds of a November Fed rate increase lurking at mere 13%.

On Tuesday, Atlanta Fed President Raphael Bostic said, "we don't need to increase rates any more." Minneapolis Fed President Neel Kashkari noted “it's possible that higher bond yields could leave less for the Fed to do.” Meanwhile,  San FranciscoFed Chief Mary Daly also said that “if bond yields are tight, that could be the equivalent of another rate hike.”

These dovish commentaries strengthened the narrative that higher borrowing costs for households and businesses could do the Fed’s job of bringing inflationary pressures down, and therefore, the US central bank could refrain from going for more tightening.

Dovish Fed expectations combined with hopes of a fresh round of stimulus from China boosted risk appetite, brushing aside the uncertainty emanating from the Hamas-Israel conflict. Bloomberg reported on Tuesday, citing people familiar with the matter that China is weighing the issuance of at least CNY1 trillion ($137.1 billion) of additional sovereign debt for spending on infrastructure such as water conservancy projects, in an effort to meet Beijing’s annual growth target.

These fundamental catalysts rendered negative for the US Dollar and the US Treasury bond yields, motivating Gold buyers to hold near the weekly highs above $1,860. Further upside in Gold price, however, remained capped, as traders erred on the side of caution ahead of Wednesday’s critical US Producer Price Index (PPI) inflation data and the Minutes of the Fed’s September policy meeting.

The US event risks could add to the dovish Fed rhetoric, fuelling further correction in the US Dollar while providing the much-needed boost to the Gold price recovery from seven-month troughs. The annual US Core PPI is seen rising 2.3% in September as against the 2.2% increase in August while the headline factory-gate inflation in the United States is expected to increase by 1.6% in September, at the same pace as seen in August. An upside surprise in the PPI inflation data will put the focus back on a potential November Fed rate hike, especially progressing toward Thursday’s all-important US Consumer Price Index (CPI) data release.

The Fed Minutes and speeches from the Fed officials will also garner attention for any impact on the US Dollar valuations and risk sentiment, eventually influencing the Gold price action.  

Gold price technical analysis: Four-hour chart

As observed on the four-hour chart, Gold price is back in bullish territory after the Relative Strength Index (RSI) indicator retreated from the overbought region. This suggests that a fresh upswing toward the key resistance at $1,880 cannot be ruled out.

That level is the intersection of the September 28 and 29 highs. Ahead of that the bearish 100-Simple Moving Average (SMA) at $1,874 will be challenged.

Adding credence to the bullish bias in the near term, the 21-SMA crossed the 50 SMA from below on a daily closing basis on Tuesday, validating a Bull Cross.

On the downside, the upward-pointing 21 SMA at $1,845 could offer immediate support to Gold buyers, below which the flattish 50 SMA at $1,838 will test the bullish commitments.  

The next relevant cushion is seen at the $1,820 round level before Gold sellers target the multi-month low of $1,811.