Gold Price Forecast: XAU/USD defines a range but upside remains favored

Gold price is looking to regain the upside traction above $2,030 so far this Thursday, following a negative close on Wednesday. But a broad-based United States Dollar (USD) rebound is capping the uptick in the Gold price yet again.

United States Consumer Price Index Downs the US Dollar

Wednesday’s headline US Consumer Price Index (CPI) data came in softer-than-expected and reinforced confidence in the market that a US Federal Reserve (Fed) rate hike pause in June is a done deal. The US Dollar tumbled with the US Treasury bond yields in an immediate reaction to soft US CPI inflation data, allowing Gold price to break higher and test the $2,050 mark. The  US Consumer Price Index rose 4.9% in April YoY but was lower than expectations of a 5.0% increase. Month-over-month CPI in April rose 0.4% after gaining 0.1% in March.

However, the monthly US Core CPI increased 0.4% in April, at the same pace as in March. Even the annualized Core CPI rose 5.5% in April. The core figures remain quite sticky, fading hopes of any Federal Reserve rate cuts this year. This helped the US Dollar stage a comeback while investors looked for safety in the Greenback amidst looming banking sector risks and US default fears. Gold price, therefore, turned south to settle the day in the red near $2,030.

Markets stay cautious amid softer China inflation data

Following the United States CPI inflation data release, all eyes were on Chinese CPI and Producer Price Index (PPI) prints for fresh market impact and Gold price action. China’s Consumer Price Index rose 0.1% in April YoY, the slowest since early 2021. Month-on-month, prices declined by 0.1%. China’s Producer Price Index, which measures prices paid by wholesalers, fell 3.6%. 

Hopes built up around China reopening and its positive economic impact seem to wane, sapping investors’ confidence early Thursday. As a result, the US Dollar is finding fresh demand, limiting the bullish attempts by Gold buyers.

Attention now turns toward the United States PPI data due later in American trading on Thursday for fresh trading impetus. Speeches from Federal Reserve policymakers will also be closely scrutinized for the Fed policy expectations.

Gold price technical analysis: Daily chart

Nothing seems to have changed technically for Gold price, as the bullish potential remains intact in the face of a falling wedge breakout confirmed last week. The 14-day Relative Strength Index (RSI) keeps its range above the midline, suggesting that bulls will likely retain control.

Gold buyers will gear up to challenge the $2,050 level once again if the renewed upside gathers momentum. Acceptance above the latter will open doors toward the record highs of $2,080.

On the flip side, Gold sellers could fight back control on a sustained move below this week’s low of $2,014, below which the mildly bullish 21-Daily Moving Average (DMA) at $2,010 will be put to the test.  

Further south, the $2,000 psychological level will remain a tough nut to crack for Gold bears.