Gold Price Forecast: XAU/USD could target $1,825 if 50-DMA support fails

Gold price is trading with moderate losses, reverting toward five-week lows at $1,853 on Friday. Gold price is kicking off the week on the wrong footing, as the United States Dollar (USD) is holding the higher ground amid risk-off market sentiment.

United States Dollar capitalizes on risk aversion

Geopolitical tensions between the United States and China are back in play, as the takedown of four unmanned aircraft has raised new concerns about relations between the United States and China. This occurred after a US fighter jet shot down a Chinese spy balloon over the South Carolina coast on February 4. Meanwhile, the Telegraph reported that China government had spotted an unidentified object flying over the waters near the northern port city of Qingdao after the Pentagon shot down an alleged Chinese unidentified object. Markets remain in an adverse condition, buoying the safe-haven demand for the US Dollar at the expense of the Gold price. The Asian stocks ex-China tumbled while the US S&P 500 futures lost 0.40%, allowing the US Dollar Index to enjoy 0.15% gains on the day.

United States Consumer Price Index data holds the key

Investors also seek safety in the US Dollar as they remain cautious heading into Tuesday’s Consumer Price Index (CPI) release from the United States. The US CPI data has been the No.1 market mover over the past year, as the outcome has a strong bearing on the US Federal Reserve’s monetary policy outlook. Earlier this month, the Federal Reserve hiked its policy rate by 25 basis points (bps) and ever since, the Fed policymakers have voiced their support for more policy tightening that could push the peak rate beyond the 5.0% mark. The hawkish Federal Reserve expectations have underpinned the US Treasury bond yields, offering legs to the recovery in the US Dollar from ten-month troughs.

With no major central bank decisions scheduled in the week ahead, markets will focus on comments from policymakers, the Bank of Japan's incoming leadership and the all-important United States Consumer Price Index.

Gold price technical analysis: Daily chart

Having confirmed a Bear Flag last Thursday, Gold price fell further on Friday and challenged the critical 50-Daily Moving Average (DMA), then at $1,855. But buyers lurked around that level, allowing a decent rebound in Gold price.

Gold sellers again took charge on Monday, attacking the 50DMA, now at $1,857. Daily closing below the latter is needed to extend the downside break from the bearish continuation pattern toward the $1,850 psychological level.

A fresh sell-off toward the January 5 low of $1,825 could be in the offing on a sustained break below the $1,850 demand area.

The 14-day Relative Strength Index (RSI) remains vulnerable below the midline, supporting the downside bias in the Gold price.

However, a bullish crossover could offer temporary respite to Gold bulls as investors await the United States Consumer Price Index for the next decisive move. The 100DMA crossed the 200DMA on Friday, validating a Bull Cross.

Should Gold bulls manage to take out the intraday high at $1,866, then a test of the bear flag support-turned-resistance at $1,877 could be in the offing. Acceptance above the latter is critical to initiating a meaningful recovery toward the $1,885 static resistance.