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.

Dhwani Mehta FXStreet

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.

AUD/USD eyes 0.7000 as USD remains on the back foot amid softer bond yields

AUD/USD fills a modest bearish gap on Monday, approaching 0.7000 during the Asian session amid holiday-thinned liquidity. The US Dollar remains on the back foot as US bond yields pull back from multi-year highs, supporting the pair. However, the Fed's hawkish outlook and the US-Iran standoff should limit USD losses. Moreover, diminishing odds of another RBA rate hike in November might cap the Aussie.

USD/JPY remains confined in a familiar range around 158.00

USD/JPY extends its range-bound price action at the start of a new week, trading around 158.00 as bulls remain on high alert amid speculation that authorities would step in to prop up the Japanese Yen. Furthermore, softer US bond yields keep US Dollar bulls on the back foot and cap the currency pair. However, geopolitical uncertainties could limit losses for the safe-haven buck amid thin liquidity due to a holiday in Japan and the US.

Gold advances to over one-week top, above $4,200 on softer bond yields/USD

Gold moves above $4,200 on Monday, hitting an over one-week high during the Asian session as softer US bond yields keep US Dollar bulls on the defensive. However, the US-Iran standoff over the Strait of Hormuz, along with a hawkish Fed, could limit USD losses. This could cap non-yielding bullion as traders look to US inflation figures and Fed Chair Kevin Warsh's speech for a fresh impetus during the latter part of this week.

Week ahead: US CPI, France’s budget crisis and Q3 earnings to set the market tone

The US dollar held relatively strong this week, despite the disappointing US jobs report on October 2, which further decreased the probability of a back-to-back rate hike by the Fed at the upcoming gathering on October 28.

Middle East War updates: New attack launched on Saudi airport

Here’s a brief recap of the key developments in the Middle East war that occurred over the weekend, which are expected to have a significant impact on markets in the upcoming week. In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?