Gold Price Forecast: XAU/USD poised to test $2,043 resistance on dovish Federal Reserve outlook

Gold price is consolidating a two-day upswing near $2,020 early Thursday as Asian traders digest softer-than-expected United States Consumer Price Index (CPI) data and its implications on the US Federal Reserve (Fed) policy outlook.

United States Consumer Price Index revives Federal Reserve doves

The US Dollar downward spiral remained unabated on Wednesday, as bulls gave up this week’s gains after the United States Consumer Price Index data came in softer-than-expected and rekindled expectations of a Federal Reserve (Fed) rate cut as early as this July. Markets are widely expecting the Fed to hold rates steady at 5.0% in June after hiking by the 25 basis points (bps) rate hike in May. Meanwhile, the odds for a rate cut in July to 4.75% now stand at 48%.

The United States Bureau of Labor Statistics (BLS) released the Consumer Price Index data for March, showing an annual increase in the inflation rate by 5.0%, while the month-on-month CPI rise was 0.1% in March. The all-items index increased 5.0% for the 12 months ending March, registering the smallest 12-month increase since the period ending May 2021. The housing component came in at 0.6% vs 0.8% last month. Shelter accounts for 34.7% of CPI inflation. 

In an immediate reaction to the soft data, the US Dollar Index gave up the 102.00 threshold, after that, tumbling as low as 101.45. The US Treasury bond yields also crashed alongside the benchmark 10-year US Treasury bond yields falling below 3.40%. Gold price received the much-needed boost from the discouraging data, accelerating its renewed upside toward the yearly top at $2,032. However, Gold buyers ran into strong resistance at $2,028, retreating to settle the day at $2,015. The sharp rebound in the US Treasury bond yields capped the Gold price bullish momentum.

Markets now look forward to the Producer Price Index (PPI) and the weekly Jobless Claims data from the United States, due later this Thursday, to add credence to the renewed dovish expectations from the Federal Reserve. Overall, Gold price is likely influenced by the Fed sentiment and the US Dollar price action ahead of Friday’s US consumer-centric data.

Gold price technical analysis: Daily chart

The daily chart shows that the Gold price remains on track to test the pennant target measured at $2,043. However, Gold bulls must take out the two key resistance levels beforehand.

Acceptance above the $2,020 round figure and the yearly top at $2,032 is critical to unleashing further upside.

The 14-day Relative Strength Index (RSI) keeps its upward momentum intact while above the midline, backing the bullish potential.

On the flip side, immediate support awaits at the previous day’s low of $2,001,  below which the extension of the pennant resistance line at $1,988 could guard the downside.

Further down, the confluence of the bullish 21-Daily Moving Average (DMA) and the pennant support at $1,978 will be a tough nut to crack for Gold sellers.