Gold Price Forecast: XAU/USD bears flex muscles ahead of United States inflation

Gold price (XAU/USD) kick-start the key week with mild gains around $1,865 as traders brace for the key United States inflation data. Even if the yellow metal is up 0.09% intraday at the latest, the XAU/USD bears remain hopeful as the latest lot of the US statistics have been impressively favoring the hawkish Federal Reserve (Fed) officials. Also favoring the Gold bears are the US-China tension and the firmer US Treasury bond yields, not to forget the US Dollar rebound.

Upbeat United States economics lure Gold bears

Having witnessed a retreat in the US Dollar during the last 2022’s, the return of strong United States data teases the Gold sellers as markets prepare for the key US Consumer Price Index (CPI) data for January.

On Friday, the preliminary readings of the US University of Michigan (UoM) Consumer Sentiment for February rose to 66.4 versus 65.0 expected and 64.9 prior. Further, the UoM noted that the year-ahead inflation expectations rebounded to 4.2% this month, from 3.9% in January and 4.4% in December.  “Long-run inflation expectations (5-year) remained at 2.9% for the third straight month and stayed within the narrow 2.9-3.1% range for 18 of the last 19 months,” Stated UoM.

It’s worth noting that the key US sentiment gauge jumped to the highest in over a year and has a likely strong positive impact on the US inflation data, which in turn can weigh on the Gold price, as the trends between confidence and spending are closely related.

Hawkish Federal Reserve officials weigh on XAU/USD price

As the recent United States Consumer Sentiment gauge and the inflation expectations join the previous employment numbers, the Federal Reserve (Fed) hawks are likely to reiterate their calls of “way to go” for policy pivot, even if Fed Chair Jerome Powell appears reserved of late.

Richmond Federal Reserve (Fed) President Thomas Barkin also joined Fed Chair Powell’s league to challenge the Gold bears, backed by higher US Jobless Claims, but the majority of others on the board are quite hawkish and can challenge the XAU/USD rebound.

It should be noted that Philadelphia Federal Reserve President Patrick Harker mentioned on Friday, “We want economy to keep growing, but also to get inflation under control, that's job one,” which in turn suggests hawkish bias at the Fed.

US-China tension, US policymakers’ optimism vs. recession woes probe Gold bulls

In nearly one week, the United States brought down three by air-to-air missiles and allege China of spying, which in turn renewed geopolitical fears among the world’s top two economies and weigh on Gold price. Adding strength to the XAU/USD bear’s confidence could be the US policymakers’ optimism, including US President Joe Biden and Treasury Secretary Janet Yellen, who ruled out recession woes and favor Federal Reserve (Fed) hawks to maintain their bias for higher rates. Additionally, the US Treasury bond yield curve inversion between the 10-year and two-year coupons also harms the Gold price. It's worth observing that the second consecutive weekly gain of the US Dollar Index (DXY) also weigh on the Gold price ahead of the key US data.

US inflation is the key

While a mixed bag of catalysts seems to challenge the Gold traders, this week’s United States Consumer Price Index (CPI) for January will be crucial as it will help clear the doubt over the Federal Reserve’s next moves. Given the hawkish expectations from the inflation numbers, the odds of witnessing two more Fed rate hikes and further downside for the Gold price can’t be ruled out. However, a surprise downtick in the CPI might new the Fed’s “policy pivot” talks and propels the XAU/USD price. It’s worth noting that the US Bureau of Labor Statistics announced on Friday that it revised the monthly Consumer Price Index (CPI) for December to +0.1% from -0.1%, based on updated seasonal adjustment factors.

Gold price technical analysis

A clear downside break of an ascending support line from November 2022, now immediate resistance near $1,875, joins bearish signals from the Moving Average Convergence and Divergence (MACD) indicator, to keep Gold bears hopeful. Adding strength to the downside bias is the steady Relative Strength Index (RSI) line, placed at 14.

However, a daily closing below the 50-day Exponential Moving Average (EMA), currently around $1,857, appears necessary for the XAU/USD sellers to retake control.

Following that, $1,825 may offer an intermediate halt before dragging the Gold price towards a four-month-old horizontal support zone near $1,805. It’s worth noting that the $1,800 round figure will act as an extra filter to the south.

Alternatively, an upside clearance of the support-turned-resistance line, near $1,875, needs to cross the previous weekly top surrounding $1,890 and January’s swing low of $1,900 to recall the Gold buyers.

In that case, a run-up towards $1,950 and the latest swing high surrounding $1,960 can’t be ruled out. However, the further upside appears difficult as the late March 2022 peak surrounding $1,966 could challenge the XAU/USD bulls afterward.

Gold price: Daily chart

Trend: Further downside expected