Gold Price Forecast: XAU/USD holds in a familiar trading range below $1,800 ahead of US CPI

  • A modest pullback in the US bond yields assisted gold to gain some positive traction on Monday.
  • Hawkish Fed expectations underpinned the USD and capped gains amid the risk-on environment.
  • Investors look forward to the US CPI report for some impetus ahead of the FOMC policy meeting.

Gold prices edged higher on the first day of a new trading week, though lacked follow-through buying and remained confined in a familiar trading range held over the past one week or so. Worries about the fast-spreading Delta variant of the coronavirus and a global economic slowdown acted as a tailwind for the safe-haven precious metal. Apart from this, a modest pullback in the US Treasury bond yields further extended some support to the non-yielding yellow metal. That said, a combination of factors held bulls from placing aggressive bets and kept a lid on any meaningful upside.

The US dollar climbed to a two-week peak amid expectations that the Fed will begin rolling back its massive pandemic-era stimulus by the end of the year. The speculations were further fueled by Philadelphia Fed President Patrick Harker's comments on Monday, who joined a chorus of policymakers keen to trim $120 billion in monthly bond purchases. This, along with a generally positive risk tone, capped gains for the dollar-denominated commodity. Investors also seemed reluctant, rather preferred to wait for a fresh catalyst from the latest US consumer inflation figures.

The US Producer Price Index (PPI) for August recorded the largest gain since November 2010 and indicated that higher inflation could persist for some time. A stronger US CPI report, scheduled for release later during the early North American session this Tuesday, will reaffirm marked expectations for an imminent Fed taper announcement. This would be enough to trigger a fresh leg up in the US bond yields, which should provide an additional boost to the already stronger greenback. This, in turn, will play a key role in influencing the XAU/USD ahead of the crucial FOMC monetary policy meeting on September 20-21.

Short-term technical outlook

Looking at the technical picture, the recent pullback from the $1,832-34 supply zone and repeated failures to find acceptance above the $1,800 mark favours bearish traders. That said, the subsequent sideways price moves witnessed over the past one week or so constitutes the formation of a rectangle and points to indecision among traders. This warrants some caution for aggressive traders and makes it prudent to wait for a sustained break in either direction before positioning for a firm near-term trajectory.

From current levels, the $1,785-84 region, or the lower boundary of the mentioned trading range, might continue to protect the immediate downside. A convincing break below will be seen as a fresh trigger for bearish traders and set the stage for a deeper retracement to the $1,750 level. The downward momentum could further get extended and drag the XAU/USD towards the $1,729-28 region en-route the $1,700 round figure.

On the flip side, the $1,800-05 area now seems to have emerged as immediate strong resistance and is closely followed by the very important 200-day SMA, around the $1,808 zone. A sustained move beyond might prompt some short-covering move and lift the metal back towards the $1,832-34 supply zone. The latter marks the multiple-tops barrier, which if cleared decisively will set the stage for a move towards the $1,853 region en-route the $1.868-70 resistance.


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