Gold Price Forecast: XAU/USD has room to rise amid inflation fears and bull cross
- Gold price probes multi-day highs as inflation and geopolitical woes underpin.
- The US dollar eases with the Treasury yields, as the market mood improves.
- Buying resurgence could see a test of $1,835 as technicals remain favorable.
Gold’s appeal as a traditional safe-haven and an inflation-hedge came into play on Tuesday, as the price clinched fresh nine-day highs at $1,829. The bright metal surged as tensions between the US and Russia over the Ukraine issue persisted amid resurfacing US-China concerns. Additionally, investors fretted about soaring inflation globally, especially ahead of Thursday’s US Consumer Price Index (CPI) data, which is expected to accelerate to 7.3% in January on an annualized basis vs. 7.0% previous. The four-decade high inflation rate in the US has heightened expectations of aggressive and faster Federal Reserve (Fed) rate hikes this year. San Francisco Fed Chief Mary Daly backed a March lift-off in her speech late Tuesday.
However, the prospects of an aggressive rate hike by the US central bank and the Treasury yields rally were overshadowed by the inflationary and geopolitical risks, underpinning gold’s bullish momentum. Gold price eased slightly off the multi-day highs amid a turnaround in the Wall Street indices, led by the tech-stocks rebound.
Gold price is sitting at the highest levels in nine days near the $1,830 barrier on Wednesday, with all eyes on the US inflation report due this Thursday. Bulls are biding time before kicking off a fresh uptrend, as the Asian markets cheer the Wall Street rebound amid retreating Treasury yields. The improving market mood-led broad US dollar weakness, however, keeps gold price supported at higher levels. Looming Russia-Ukraine tensions also collaborate with the upside in the safe-haven gold.
In the day ahead, the broader market sentiment combined with the yields’ price action will continue to influence the yellow metal, in absence of any top-tier US economic releases. Meanwhile, a speech by Cleveland Fed President Loretta Mester will be also closely followed.
Gold Price Chart - Technical outlook
Gold: Four-hour chart
Gold price is in an upside consolidative mode so far this Wednesday, prepping up for a fresh leg up once the $1,830 round level is cleared.
The next bullish target is seen at the horizontal trendline resistance at $1,835. Further up, bulls will challenge a powerful hurdle of around $1,848.
The Relative Strength Index (RSI) is challenging the overbought boundary just under 70.00, allowing room for more upside.
A bull cross, represented by the 21- and 200-Simple Moving Averages (SMA) crossover, also adds credence to the prospects of a move higher.
On the flip side, $1,820 could limit any retracement, below which strong support around $1,817 will test the bullish commitments. The latter is the confluence of the horizontal 100-SMA and upward-pointing 21-SMA.
Sellers will then target the horizontal 200-SMA support at $1,814.
Author
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.
