Gold Price Forecast: XAU/USD seems poised to challenge $1,832-34 supply zone

Gold built on last week's dovish central banks-inspired strong positive move and posted gains for the third successive session on Monday. The Fed stuck to its transitory inflation narrative and indicated that policymakers were in no rush to hike borrowing costs. Separately, the Bank of England surprised investors and decided to hold interest rates steady. This, in turn, was seen as a key factor that acted as a tailwind for the non-yielding yellow metal.

Bulls further took cues from the ongoing US dollar retracement slide from over 13-month tops touched in reaction to the upbeat US monthly jobs report on Friday. The headline NFP showed that the US economy added more than expected, 531K jobs in October and the unemployment rate fell to 4.6% from 4.8% previous. That said, a disappointment from the lower participation rate prompted some USD long-unwinding and benefitted the dollar-denominated commodity.

Gold finally settled near the top end of its daily trading range and touched a fresh two-month high during the Asian session on Tuesday. The risk-off impulse in the equity markets extended some support to the safe-haven XAU/USD amid a fresh leg down in the US Treasury bond yields. This, along with sustained USD selling bias, support prospects for additional gains, though traders preferred to wait for a fresh catalyst from the latest US consumer inflation figures.

Despite the Fed's dovish outlook, investors seem convinced that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. Hence, the focus will remain glued to the release of the US CPI report on Wednesday. The data will influence Fed rate hike expectations and provide a fresh directional impetus to gold. In the meantime, the XAU/USD remains at the mercy of the USD price dynamics and the broader market risk sentiment.

Later during the early North American session, traders will take cues from the US economic docket – featuring the release of the Producer Price Index (PPI). Apart from this, Fed Chair Jerome Powell's remarks at an online conference will be looked upon for some short-term trading opportunities around gold.

Technical outlook

From a technical perspective, last week's sustained breakthrough the 100/200-day SMAs confluence and subsequent strength above the $1,1810 level favour bullish traders. The positive outlook is reinforced by the fact that technical indicators on the daily chart are holding in the positive territory and are still far from being in the overbought zone. Hence, some follow-through move towards testing a strong barrier, around the $1,832-34 heavy supply zone, remains a distinct possibility.

On the flip side, any meaningful pullback now seems to find decent support near the $1,808-07 region. A subsequent slide might still be seen as a buying opportunity near the $1,800 round-figure mark. This should help limit the corrective fall near the $1,790-86 region. The latter marks the 100/200-DMA confluence, which if broken could trigger aggressive technical selling and drag gold back towards the $1,780 support zone.