Gold Price Forecast: XAU/USD establishes above $1,850 as DXY weakens, focus is on US Inflation

Gold price (XAU/USD) has displayed a minor correction after recording a high around $1,856.00 on Tuesday but is holding strongly above the crucial resistance of $1,850.00 as the US dollar index (DXY) has slipped sharply.  The precious metal has been advancing higher gradually after hitting a low of $1,837.06 and is expected to extend gains if the bright metal oversteps Tuesday’s high at $1,855.64.

The DXY surrendered the majority of its gains recorded on Tuesday after failing to cross the critical barricade of 102.83. A rebound in the risk-on impulse after investors ignored the uncertainty ahead of the US inflation strengthened the risk-perceived currencies and the precious metal. The US Consumer Price Index (CPI) is expected to remain unchanged at 8.3% while the core CPI that doesn’t include food and energy prices may slip to 5.9% vs. the prior print of 6.2%.  

The sustainability of the US inflation above 8% is going to put forward complications for the Federal Reserve (Fed). The Fed is going to dictate its monetary policy next week and elevated inflation along with the upbeat US Nonfarm Payrolls (NFP) will compel a rate hike decision.

Gold technical analysis

On an hourly scale, the gold price is oscillating in a wider range of $1,828.98-1,874.16 for a prolonged period. The precious metal is forming a Darvas Box chart pattern that signals a slippage in volatility followed by a breakout in the same. A 50-period Exponential Moving Average (EMA) at $1,849.74 is overlapping to the prices, which signals a rangebound move going forward.

Meanwhile, the Relative Strength Index (RSI) is struggling to enter into the bullish range of 60.00-80.00. An establishment in the same will strengthen the gold bulls.

Gold hourly chart