Gold Price Forecast: XAU/USD holds above $2,000, investors await US CPI data

Gold price (XAU/USD) recovers its recent losses during the early Asian trading hours on Monday. The unexpectedly upbeat US labor market boosts the US Treasury yields climbing and diminishes investors’ appetite for the yellow metal. However, the yellow metal attracts some buyers as it finds support near the two-week low of $1,995. Gold price currently trades near $2,005, up 0.14% on the day.

On Friday, the highly-anticipated US Nonfarm Payrolls (NFP) rose by 199K in November from the previous reading of 150K. Additionally, the Unemployment Rate declined to 3.7% from 3.9% in the previous reading. Average Hourly Earnings held steady at 4.0%, matching market expectations.

Finally, the preliminary University of Michigan Consumer Sentiment Index for December came in at 69.4 versus 61.3 prior. In response to the data, the US Dollar Index (DXY) rose to 104.25 and the US Treasury yields edged higher, with the 10-year yield climbing from 4.15% to 4.28%.

The Fed will announce the interest rate decision on Wednesday, its last meeting of the year. The markets anticipate no change in rates for its December meeting and think the dot plot will come down. Nonetheless, the market lowered its expectations for the first-rate cuts from March to May after stronger employment data

The firmer US Dollar (USD) and the concern about China’s deflation create a headwind for the gold price. On Saturday, the National Bureau of Statistics of China revealed that the nation’s Consumer Price Index (CPI) dropped 0.5% YoY in November from a 0.2% decline in October, worse than the market expectation of 0.2%. The Producer Price Index (PPI) declined 3.0% YoY in November from a 2.6% decline in October, below the market consensus of a 2.8% decline in the reported period.

Looking ahead, market players will monitor the US Consumer Price Index (CPI) on Tuesday. The spotlight will be the Federal Open Market Committee (FOMC) meeting, held on Tuesday and Wednesday. Traders will take cues from this event and find trading opportunities around the gold prices.