Gold Price Forecast: XAU/USD retreats from fresh highs, holds above $1,870

XAU/USD Current price: $1,871.98

• The US Consumer Price Index was higher than anticipated in September.
• US Treasury yields surged, pushing the US Dollar higher across the board.
• XAU/USD eases from fresh weekly highs, aims to extend the intraday slide.

Spot gold eased from a fresh weekly high of $1,885.01 a troy ounce following the release of American data, currently trading at around $1,872. The US Dollar remained under pressure throughout the first half of the day as the better performance of high-yielding equities limited demand for the safe-haven currency.  

Investors were waiting for the United States (US) inflation update while looking at weaker government bond yields. Finally, the country reported that the Consumer Price Index (CPI) rose by 0.4% MoM in September and 3.7% from a year earlier, higher than anticipated. The annual core CPI printed at 4.1%, meeting expectations while easing from the previous 4.3%. At the same time, the country released Initial Jobless Claims for the week ended October 6, which resulted in 209K, slightly better than the 210K expected.

The USD surged with the news as the figures opposed the Federal Reserve’s wishes for cooler inflation and a loose labor market. Treasury yields picked up, with the 10-year note now offering 4.65% and the 2-year note yielding 5.07%. Ironically, Fed officials noted that higher yields could offset the need for additional rate hikes, with market fears doing policymakers’ job.

XAU/USD short-term technical outlook

XAU/USD trimmed early gains and trades with modest intraday losses. The daily chart shows that it briefly traded above a bearish 20 Simple Moving Average (SMA), which currently converges with the 50% retracement of the latest daily slump at $1,878.60. At the same time, the 100 SMA crossed below the 200 SMA, roughly $50 above the current level. Finally, technical indicators lost their upward strength and turned marginally lower within negative levels, hinting at another leg lower before the weekend.

The 4-hour chart shows XAU/USD is currently around a bearish 100 SMA, while the 20 SMA keeps advancing below the current level. The Momentum indicator consolidates within positive levels, while the Relative Strength Index (RSI) indicator corrected overbought conditions, heading south far above its midline. The 38.2% retracement of the aforementioned decline provides immediate support at $1,862.70, with a steeper decline expected on a break below it.

Support levels: 1,862.70 1,853.00 1,844.10  

Resistance levels: 1,878.60 1,891.40 1,904.70

View Live Chart for XAU/USD