Gold Price Forecast: XAU/USD awaits key US CPI data as next catalyst

Tokyo Update: Gold (XAU/USD) is trading flat in Asia as the US dollar remains robust in the face of renewed covid concerns and prospects of Fed taper in the coming months. The price is on the verge of a pull back into old support that would be expected to act as resistance on initial attempts. This can be seen on the lower time frames, such as the 15-min chart. 

The bears had control at the start of the week and the price remains submerged below pressures of the psychological $1,800 level. Bulls need a break of there, at least, to regain traction and to take on the critical $1,800 level. On the flip side, the bears will be in charge on a break of $1,770 with prospects of a deeper run into the $1,750s below there. 

For the day ahead, there will be some anticipation surrounding the US Consumer Price Index. This follows the August NY Fed’s measure of inflation expectations that rose to a record high overnight. ''From an expectations perspective, there is no doubt that the Fed is meeting its inflation target under the new Average Inflation Targeting (AIT) criteria,'' analysts at ANZ Bank explained. 

End of update

Gold (XAU/USD) stays tight-lipped inside a short-term trading range surrounding $1,800, grinding near $1,793 as Asian traders brace for the key Tuesday.

Downbeat US Treasury yields helped the yellow metal to post the heaviest daily gains since August 03. However, the market’s anxiety ahead of the crucial US Consumer Price Index (CPI) data for August keeps the commodity inside a familiar region.

Friday’s record US Producer Price Index (PPI) data and the early week comments from Philadelphia Federal Reserve Bank President Patrick Harker propel the Fed tapering chatters and weigh on the gold’s upside moves. Also challenging the buyers are the coronavirus fears amid talks that US President Joe Biden’s six-pronged strategy may not overcome the covid woes. “US President Biden vaccine mandate will have modest impact on economy,” said Goldman Sachs per Reuters.

On the other hand, Hurricane Ida, typhoon Chanthu and tropical storm Nicholas seem to keep the gold buyers hopeful amid the US dollar’s sluggish moves and downbeat performance of the US Treasury yields. Further, China’s recently assertive behavior with the global leaders and vaccine hopes in the Asia-Pacific underpin the commodity’s upside moves.

Against this backdrop, the US Dollar Index (DXY) closed unchanged on Monday after refreshing the monthly top whereas the US 10-year Treasury yields 1.5 basis points to 1.32%. Further, the Wall Street benchmarked closed mixed but the S&P 500 Futures print mild gains by the press time.

Hence, bulls and bears jostle ahead of the key US data that will help forecast the next week’s US Federal Reserve (Fed) moves. Should the US CPI manage to soften, as expected, gold may extend the recovery moves but a strong inflation number is likely to amplify the Fed tapering chatters and weigh on the gold prices.

Read: US Inflation Preview: CPI critical for taper, three scenarios for the dollar

Technical analysis

Although gold remains range-bound between $1,804 and $1,782 of late, the commodity’s sustained trading below the key moving averages, namely 50-DMA and 200-SMA, keeps sellers hopeful.

However, a steady RSI line suggests further sideways moves and hence needs confirmation below $1,782 to recall the XAU/USD bears. For that matter, the August 19 low surrounding $1,774 can work as an extra filter to the south.

Should gold sellers manage to keep reins past $1,774, five-week-old horizontal support near $1,760-58, the $1,724 and the $1,700 threshold can act as extra supports before directing gold sellers toward the yearly low near $1,687.

Alternatively, an upside clearance of $1,804 needs to cross the 200-SMA resistance to convince short-term buyers.

Even so, August high around $1,824 and the double tops around $1,834-35 will be a strong challenge for gold buyers.

Gold: Daily chart

Trend: Downside expected