Gold Price Forecast: XAU/USD pullback points to a fresh upswing towards $1,900?

Gold price enjoyed good two-way price action on Tuesday, although it posted losses so far this week. Gold price initially rose as high as $1,877, a fresh five-month top, as persistent inflation concerns continued to underpin the metal’s appeal as an inflation hedge. Further, a pullback in the Treasury yields also helped gold to shine in the first half of the day. The tide, however, turned in favor of bears after the US Retail Sales release, as an upbeat data bolstered the Fed’s rate hike expectations, pushing up the US dollar alongside yields. The 10-year benchmark yield hit its highest level in three-weeks at 1.64% while the US dollar index tested the 96.00 level. US Retail Sales rose for the third straight month in October, arriving at 1.7% MoM vs. 1.4% expected. The upbeat mood on Wall Street indices also exerted additional downward pressure on gold price.

As the dust settles the volatility caused by the US Retail Sales release, gold price is looking to find its feet, the US Treasury yields fail to hold the higher ground amid the risk-off market mood. The renewed weakness in yields is capping the US dollar rally to fresh 16-month highs, keeping gold price afloat above $1,850. US-Sino trade concerns and China Evergrande default risks have resurfaced, weighing on risk sentiment, lending support to the safe-haven gold.

Looking ahead, UK and Eurozone inflation data will be closely eyed amid looming fears over rising price pressures and expectations of global monetary policy tightening. Fed speculation will also lead sentiment and could have a strong impact on the dollar valuations, in turn, influencing gold price action.

Gold Price Chart - Technical outlook

Gold: Daily chart

Gold has managed to find strong bids at $1,850, now heading back towards the recent strong resistance at $1,870.

If the recovery momentum sustains above the latter, then the June 14 tops of $1,878 will be targeted for another retest.

The next relevant upside target will then be the $1,900 psychological level.

The 14-day Relative Strength Index (RSI) has stalled its descent and is now edging higher while holding above the midline. This leading indicator suggests a fresh upswing could be in the making.

The 100-Daily Moving Average (DMA) has pierced through the 200-DMA from below, representing a bull cross, adding credence to the renewed optimism.

Should gold bears fight back and gain control of the price it could breach the $1,850 demand area, below which the November 11 lows of $1,843 could be back in play.

Further south, the previous critical resistance now support at $1,834 will be the level to beat for gold bears.