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Gold Price Forecast: XAU/USD could rebound toward record highs if $2,145 support holds

  • Gold price holds steady after plunging on Tuesday following hot US CPI data.
  • Dollar and Treasury yields pause their rebound amid USD/JPY decline.
  • With US CPI out of the way, the focus shifts to Thursday’s Retail Sales and PPI data.

Gold price is licking its wounds near $2,160 after witnessing about 1% percent correction from near record highs of $2,195 on Tuesday. Gold sellers are catching a breath, as the US Dollar and the US Treasury bond yields pause their recovery momentum, fuelled by hotter-than-expected US Consumer Price Index (CPI) data.  

Hot US CPI fails to temper June Fed rate cut bets

Data on Tuesday showed that the US CPI rose 3.2%  in February from a year ago, beating the market forecast of 3.1%. The monthly CPI increased 0.4% in the same period. Core CPI, which excludes food and energy prices, increased 0.4% from the last month and 3.8% over the year.

In the aftermath of the encouraging US data, Gold price gave into the renewed US Dollar strength, as the benchmark 10-year US Treasury bond yields spiked nearly five basis points (bps) to recapture 4.15%.

However, US stocks rebounded firmly despite the hot US CPI report, as markets continued to price in about a 70% chance that the Fed could begin easing rates in June, per the CME FedWatch Tool. Stick US inflation data failed to deter the dovish expectations, capping the upswing in the Greenback alongside the US Treasury bond yields.

Thus, Gold price has stalled its corrective decline, also as renewed geopolitical tensions lend support to the traditional safe-haven. Reuters reported that “Ukraine pounded targets in Russia on Tuesday with dozens of drones and rockets in an attack that inflicted serious damage on a major oil refinery and sought to pierce the land borders of the world's biggest nuclear power with armed proxies.”

Markets will continue to assess the US data and its implications on the Fed interest rates outlook amid a data-light US calendar ahead. Meanwhile, the US Dollar could come under fresh selling pressure if the USD/JPY decline extends on increased bets of a March rate hike by the Bank of Japan (BoJ). In such a case, Gold price could resume its upward trajectory.

Traders now look to the US Retail Sales and Producer Price Index (PPI) data due on Thursday for fresh trading incentives.

Gold price technical analysis: Daily chart

As observed on the daily chart, Gold price corrected on Tuesday amid extremely overbought conditions, as indicated by the 14-day Relative Strength Index (RSI).

On Wednesday, the RSI stalled its descent from the extremely overbought region, suggesting that a Gold price upswing remains in the offing.

Further, Gold price has found strong support just above 2,145, where the March 7 low and the 23.6% Fibonacci Retracement (Fibo) level of the recent rally from the February 14 low of $1,984 to the all-time high of $2,195 coincide.

Defending the latter is critical to resume the uptrend toward Tuesday’s high of $2,185, above which the all-time highs of $2,195 will be retested. The next key upside targets are seen at the $2,200 threshold and the $2,250 psychological level.

Alternatively, a sustained break below the abovementioned support of $2,145, Gold sellers could flex their muscles for a test of the static support at $2,125.

The last line of defense for Gold buyers is aligned at the 38.2% Fibo level of the same ascent at $2,116.

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Author

Dhwani Mehta

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.

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