Gold Price Forecast: XAU/USD set to take out key resistance at $2,007, focus shifts to US inflation

Gold price is heading back toward the $2,000 threshold on Tuesday, following a bearish start to the week on Easter Monday. Holiday-thinned trading and a broadly firmer United States Dollar (USD) corroborated the extended correction in the Gold price.

United States Dollar pauses, awaiting Federal Reserve speeches

So far this Tuesday’s trading, Gold price is attempting a comeback after witnessing three straight days of decline, as the US Dollar has stalled its recovery rally amid a positive shift in risk sentiment. Softening inflationary pressure in China offers some relief to the markets as the Western world battles an unrelenting fight against stubborn inflation. China’s Consumer Price Index (CPI) came in at 0.7% than a year earlier in March, rising slower than the 1.0% annual gain seen in February. Meanwhile, China’s Producer Price Index (PPI) decelerated by 2.5% YoY in March, compared with the -2.5% expectations and -1.4% previous reading.

Risk flows strengthened after Australia announced the suspension of its World Trade Organization (WTO) dispute against China on barley, while the Nikkei Asian Review reported that Warren Buffet is considering boosting its investment in Japanese stocks. The US S&P 500 futures are adding 0.16% on the day, while the US Dollar Index is consolidating the previous surge below 102.50 at the time of writing.

Meanwhile, the US Treasury bond yields are trading listlessly across the curve, with the benchmark 10-year US Treasury bond yields down 0.33%. Investors are resorting to repositioning ahead of the critical United States Consumer Price Index (CPI) data due on the cards this Wednesday. Traders will also pay close attention to the Minutes of the Federal Reserve March meeting on Wednesday for repricing the May rate hike expectations. Currently, markets are pricing a 71% probability of a 25 basis points (bps) rate hike next month, according to the CME Group FedWatch Tool.

India, China bump up Gold reserves

Adding to the renewed upside in the Gold price, the Reserve Bank of India (RBI) followed in China's footsteps with another gold purchase in March, according to the latest data reported by the World Gold Council (WGC). India bought 3.5 tonnes of gold bullion last month, raising its Q1 total to 7.3 tonnes, said WGC's senior analyst Krishan Gopaul. The central bank now holds 794.6 tonnes of gold in its reserves.

On Friday, the People’s Bank of China (PBoC) reported that China’s Gold reserves increased to 66.50 million fine troy oz in end-March, compared with 65.92 million troy oz seen in end-February. Note that India and China are the world’s biggest Gold consumers.

International Monetary Fund’s (IMF) Managing Director Kristalina Georgieva said Monday that “the global economy is estimated to grow less than 3 per cent in 2023, with India and China expected to account for half of the global growth this year.

Gold price technical analysis: Daily chart

The daily technical outlook for Gold price remains more or less the same, with ‘dip-buying likely to stay the underlying strategy for Gold traders.

Gold price is looking to regain the $2,000 strong support-turned-resistance on Tuesday, following a weak start to the week.

The powerful support at $1,983 is guarding the downside for Gold price. That level is the confluence of the pennant resistance and support.

It’s worth mentioning that Gold price yielded an upside break from a two-week-long pennant formation last Tuesday, triggering a rally to a fresh yearly high at $2,032.

Despite the recent correction, risks remain skewed to the upside for the Gold price, as the 14-day Relative Strength Index (RSI) has swung higher while holding comfortably above the midline.

The next resistance for Gold price is seen at the $2000 mark, above which the $2,007 static resistance will come into play. After that, a sustained move above the $2,020 figure will expose the yearly top at $2,032.

Conversely, daily closing below the abovementioned critical support will prompt Gold sellers to resume the correction toward the April 4 low at $1,977.

The next downside cushion is envisioned at the bullish 21-Daily Moving Average (DMA) of $1,970. Should the selling extend, the $1,960 round figure will be a tough nut to crack for Gold bears.