Gold Price Forecast: XAU/USD bulls eye $1,787 ahead of Federal Reserve’s favored inflation number

Gold price (XAU/USD) begins December on a firmer footing around $1,768, after posting the biggest monthly gains in 29 months during November. That said, the yellow metal’s latest run-up could be linked to the dovish comments from Federal Reserve (Fed) Chairman Jerome Powell, as well as optimism surrounding China. However, buyers seem to take a breather ahead of the Fed’s preferred inflation gauge, namely the United States Core Personal Consumption Expenditure (PCE) Price Index for October.

Federal Reserve Chairman Jerome Powell drowned US Dollar, pumped Gold price

On Wednesday, Fed Chair Jerome Powell marked his first public appearance after November’s Federal Open Market Committee (FOMC) meeting while speaking at the Brookings Institute on the economic outlook, inflation and employment. The policymaker stated that it makes sense to moderate the pace of interest rate increases while also suggesting that the time to slow the pace of rate hikes could come as soon as the next meeting in December.

Ahead of him, Federal Reserve member of the Board of Governors Lisa D. Cook also spoke and praised the inflation data to signal that the Fed would likely take smaller steps as it moves forward.

Following Powell’s speech, the market’s wagers favoring a 50 basis points (bps) rate hike from the Federal Reserve in December increased from 69.9% ahead of the speech to above 75%.

With this, the US Dollar Index (DXY) snapped a three-day uptrend while portraying the biggest daily loss in a week, not to forget mentioning the biggest monthly fall in 12 years. It’s worth noting that the Wall Street benchmarks cheered the dovish remarks from Fed Chair while the United States 10-year Treasury bond yields reversed the early gains to end November on a negative footing around 3.61%.

Given the inverse relationship between the US Dollar and Gold, the metal cheered a slump in the Greenback by crossing the key technical hurdle and luring buyers.

Data from United States also favored XAU/USD bulls

In addition to the dovish comments from the Federal Reserve (Fed) policymakers, downbeat economics from the United States (US) also underpinned the Gold price rally the previous day.

Among them, US ADP Employment Change gained major attention as it marked the lowest readings since January 2021 with a 127K figure for November versus 200K forecast and 239K previous readings. On the same line was the US JOLTS Job Openings for October that eased to 10.334M versus 10.3M expected and 10.687M prior. On the other hand, the second estimate of the US Gross Domestic Product (GDP) Annualized for the third quarter (Q3) marked 2.9% growth versus 2.6% initial forecasts.

China-linked optimism adds strength to Gold price run-up

Considering China’s status as one of the biggest consumers of the Gold, the recent easing in the nation’s daily Covid infections favored the XAU/USD bulls. That said, the Dragon nation reported just around 38,000 daily Coronavirus cases on Tuesday, conveyed on Wednesday, marking the second consecutive day of receding virus numbers after refreshing the record high.

Not only the easy cases but the gradual reliefs in the virus-led activity controls in major cities like Zhengzhou, Guangzhou and Chongqing, also seemed to have favored the Gold price.

United States Core PCE Inflation eyed

Looking forward, US Core PCE Inflation, expected 5.0% YoY in October versus 5.1% prior, will be crucial for immediate Gold price moves as a surprise increase in the inflation numbers could probe the XAU/USD bulls. Also important will be the monthly prints of the US ISM Manufacturing PMI for November, expected 49.8 versus 50.2 prior.

Also read: US October PCE inflation & ISM Manufacturing PMI Preview: Seen through Fed’s eyes

Overall, the Gold price remains on the buyer’s radar ahead of the key US data.

Gold price technical analysis

Gold price remains firmer after confirming further upside momentum by breaking a two-week-old descending trend line, as well as marking repeated bounces off the 100-bar Simple Moving Average (SMA), mostly known as the 100-SMA.

The bullion’s latest run-up also justifies the Moving Average Convergence and Divergence (MACD) indicator’s bullish signals, as well as firmer prints of the Relative Strength Index (RSI) line, placed at 14, which is not overbought.

With this, Gold price run-up towards the monthly high surrounding $1,787 appears imminent.

However, the $1,800 threshold and August month peak near $1,808 could challenge the XAU/USD bulls afterward.

On the flip side, the resistance-turned-support line, around $1,758 by the press time, restricts the immediate downside of the metal before the 100-SMA level surrounding $1,751.

It’s worth noting, however, that the Gold sellers might not risk entries unless witnessing a clear downside break of the one-month-old horizontal support, around $1,730.

Gold price: Four-hour chart

Trend: Further upside expected