Gold Price Forecast: XAU/USD rebounds but downside bias still intact below 50-DMA

Gold price is attempting a tepid comeback early Thursday, having hit the lowest level in six weeks at $1,831 on Wednesday. The correction in the United States Dollar (USD) from over one-month highs provides some respite to Gold bulls.

 All-important United States Consumer Price Index (CPI) data on Tuesday. Gold price is resuming its downtrend below $1,850 in Wednesday’s trading so far. Investors await the United States Retail Sales data and US Federal Reserve commentary for fresh trading directives.

Strong United States Retail Sales data boosted the US Dollar  

The US Dollar regained lost footing and rallied hard in tandem with the US Treasury bond yields after the top-tier Retail Sales data from the United States came in way stronger than the market expectation on Wednesday. The United States Consumer Spending, as represented by Retail Sales,  rebounded to 3.0% MoM in January vs. 1.8% expected and -1.1% previous, while the Core Retail Sales also jumped to 2.3% when compared to the estimates of 0.8% and the previous reading of -0.9%. Strengthening consumer demand combined with hot US Consumer Price Index (CPI) and stunner Nonfarm Payrolls (NFP) data pointed to a resilient American economy, which bolstered rate hike expectations from the US Federal Reserve (Fed). As a result, the US Treasury yields caught a fresh bid across the curve and propelled the US Dollar alongside, weighing heavily on the USD-denominated Gold price. The recent hawkish commentary from the Federal Reserve policymakers also indicates further tightening ahead, exacerbating the pain in the non-interest-bearing Gold price.

Gold price cheers resurgent Chinese Gold demand

Although the upbeat market mood is aiding the correction in the US Dollar in Thursday’s trading so far, allowing Gold bulls to attempt a recovery. Gold price is also capitalizing on the upbeat report from the World Gold Council (WGC), released on Wednesday. The WGC said in its latest report that China's Gold imports increased by 64% year-on-year last year, totalling up to 1,343 mt of gold, the highest level since 2018. This comes after the People's Bank of China (PBOC) ramped up its holdings of Gold by 970,000 ounces to 64.64 million ounces in December last year, increasing its holdings of gold for the second consecutive month.

A fresh batch of United States economic data will be closely followed, with the weekly Jobless Claims, Housing Starts and the Producer Price Index (PPI) coming up. Speeches from some Fed officials will also remain a significant driver in the US Dollar price valuations, eventually impacting the Gold price.

Gold price technical analysis: Daily chart

Gold price breached the falling trendline support at $1,838 and extended the decline to test the $1,830 round figure.

At the time of writing, Gold bulls have managed to recapture the falling trendline support-turned resistance, now at $1,836.

Gold price needs a sustained break above the $1,850 psychological level for the recovery momentum to pick up steam. The next upside target for Gold buyers is seen at the critical 50-Daily Moving Average (DMA) of $1,861.

The 14-day Relative Strength Index (RSI) is inching higher but remains below the 50.00 level, suggesting that the downside potential remains in place for the Gold price.

The horizontal trendline support from the January 5 low at $1,825 continues to remain in the sight of Gold optimists.

However, the abovementioned trendline support at $1,836 and the $1,830 demand area will be retested should sellers fight back control.