Gold Price Forecast: XAU/USD buyers could not crack the $1800 despite falling US bond yields

Gold price records gains for four consecutive weeks, up 1.08%.
Lower US inflation data during the week keeps investors cheerful and hopeful that the Fed will tighten “less” aggressive.
The UoM Consumer Sentiment report for August exceeded expectations.
Gold Price Forecast: Range-bound despite broad US dollar weakness throughout the week.

Christian Borjon Valencia FXStreet

Gold price erases some of Thursday’s gains, though stays below $1800 due to falling US bond yields, spurred by earlier US inflation data revealed during the week. That consumer and wholesale prices are showing signs of easing could deter the US Federal Reserve from tightening aggressively. At the time of writing, the XAU/USD is trading at $1794.49 a troy ounce.

US Consumer Sentiment rises, while US inflation expectations are mixed

Global equities are recording gains, portraying an improved risk appetite. At the time of typing, the University of Michigan Consumer Sentiment for August came better-than-estimated, at 55.1 vs. 52.5 expected, while inflation expectations for one year, easied to 5% from 5.2%, while for a five-year horizon uptick from 2.9% to 3.0%.

Joanne Hsu, director of the survey, said, “In spite of this strength in the labor market and some signs of improvement in inflation, consumer sentiment remains very low by historical standards.”

In the meantime, Fed speakers continued its campaign that they’re not done tackling inflation, led by San Francisco’s Fed Mary Daly. During an interview with Bloomberg on Thursday, she said that inflation is too high, despite consumer and producer prices indicating inflation is slowing. She favors a 50 bps rate hike for the September meeting as a base case, but she does not take off a 75 bps out of the table and would depend on data. She downplayed recession fears and foresaw the Federal funds rate (FFR) to end at 3.4% by the end of the year.

Meanwhile, Richmond’s Fed Thomas Barkin said that inflation data this week is “welcome,” but he wants to see a sustained period under control. He added that more hikes are coming while saying that he’s undecided about the size of the rate increase.

The US Dollar Index, a gauge of the buck’s value against a basket of peers, is up 0.57% at 105.687, while the US 10-year bond yield drops three basis points to 2.857%, a tailwind for gold prices.

Apart from this, tensions between the US and China regarding Taiwan calmed throughout the day. However, Europe’s economic crisis may encounter another factor to consider, with the Rhine River in Germany breached its 40 cms level, which would halt navigation through it

What to watch

Next week, the US economic docket will feature the NY Fed Manufacturing, Housing data, Industrial Production, and Retail Sales.

Gold Price Forecast (XAU/USD): Technical outlook

During the last week, XAU/USD prices consolidated in the $1783-$1807 range. It’s worth noting that despite lower US inflation data reported, which propelled lower US bond yields, gold could not break the range and push towards the confluence of the 100 and 200-day EMA, around the $1837-$1842 area.

If XAU/USD breaks above $1807, traders could expect gold to test the latter. Otherwise, if the gold price continues below $1800, a move towards the 20-day EMA at $1753.49 is on the cards.

Author

Christian Borjon Valencia

FXStreet

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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