Gold Price Forecast: XAU/USD holds steady near multi-week high ahead of key US CPI report

• Gold shot to a four-week high on Monday, albeit lacked any follow-through buying.
• The Ukraine crisis, inflation fears continued lending some support to the commodity.
• The Fed’s hawkish outlook, surging US bond yields, stronger USD capped the upside.
• The market focus will remain glued to the US consumer inflation figures on Tuesday.

Gold witnessed good two-way price moves on the first day of a new week and was influenced by a combination of diverging forces. Concerns that the war in Ukraine and tough new COVID-19 restrictions in China could hit global growth continued weighing on investors' sentiment. This, along with inflation fears, benefitted the safe-haven commodity's appeal as a hedge against rising costs. That said, the prospects for a more aggressive policy tightening by the Fed kept a lid on any meaningful upside for the non-yielding yellow metal.

The markets seem convinced that the US central bank will hike interest rates by 50 bps over the next few meetings to curb soaring inflation. The bets were reinforced by comments from Chicago Fed President Charles Evans, who has long been one of the more dovish policymakers. Evans said that an accelerated pace of interest-rate increases to combat inflation is worth debating. Apart from this, worries that the recent surge in commodities would put upward pressure on already high consumer prices pushed the US Treasury bond yields to a fresh multi-year peak.

This, in turn, assisted the US dollar to stand tall near its highest level since May 2020, which acted as a headwind for the dollar-denominated gold and attracted some intraday selling at higher levels. Hence, the market focus will remain glued to the latest US consumer inflation figures, due for release later this Tuesday. In the meantime, the prevalent risk-off mood extended some support to spot gold during the Asian session. That said, any meaningful upside seems elusive as traders might refrain from placing aggressive bets ahead of the key macro data.

Technical outlook

From a technical perspective, the recent recovery move from sub-$1,900 levels has been along an upward-sloping trend channel and favours bullish traders. That said, gold, so far, has struggled to find acceptance above the 38.2% Fibonacci retracement level of the $2,071-$1,890 fall. Moreover, the overnight move up faltered near the channel resistance, warranting some caution before positioning for any further gains. The said barrier, currently around the $1,972 region, should now act as a pivotal point, above which bulls could aim back to reclaim the $2,000 psychological mark.

On the flip side, the $1,946-$1,945 region now seems to protect the immediate downside ahead of the $1,934 area and the $1,928 zone. The latter coincides with the lower boundary of the aforementioned channel, which if broken decisively will shift the bias back in favour of bearish traders. Gold could then accelerate the fall towards the $1,915 intermediate support before eventually dropping to the $1,900-$1,890 region. Some follow-through selling would set the stage for a slide towards the next relevant support near the $1,872-$1.870 zone.