Gold Price Forecast: XAU/USD manages to defend 50 DMA, upside remains capped

Gold price extends its consolidative price move through the early European session on Monday and is currently placed around the $1,865 region. The XAU/USD manages to hold above the 50-day Simple Moving Average (SMA) support, though remains well within the striking distance of over a one-month low touched on Friday.

Hawkish Federal Reserve acts as a headwind for Gold price

The prospects for further policy tightening by the Federal Reserve (Fed) continue to underpin the US Dollar and act as a headwind for the non-yielding Gold price. In fact, a slew of Federal Open Market Committee (FOMC) policymakers, including Fed Chair Jerome Powell, last week stressed the need for additional interest rate hikes to fully gain control of inflation.

Moreover, the Labor Department's annual revisions of the Consumer Price Index (CPI) showed on Friday that consumer prices rose in December instead of falling as previously estimated. Adding to this, the University of Michigan survey's one-year inflation expectations climbed to 4.2% this month from the 3.9% previous and reaffirmed expectations for a more hawkish Fed.

Recession fears lend support to safe-haven XAU/USD

This, in turn, assists the USD to stand tall near a one-month high, which is seen as another factor that contributes to capping the upside for the US Dollar-denominated Gold price. That said, the prevalent risk-off environment - amid looming recession risks - lends some support to the safe-haven precious metal and helps limit the downside, at least for the time being.

Focus remains on consumer inflation figures from United States

Apart from this, the risk of higher inflation print for January lends support to the Gold price, which is considered a hedge against rising inflation. Hence, the market focus remains glued to the crucial CPI report from the United States (US), due for release on Tuesday. The data could influence the Fed's rate-hike path and determine the near-term trajectory for the XAU/USD.

Gold price technical outlook

From a technical perspective, a sustained break and acceptance below the 50-day SMA, currently around the $1,856 region, will be seen as a fresh trigger for bearish traders. The gold price could then accelerate the fall towards the next relevant support near the $1,830 area en route to the $1,818-$1,817 zone and the $1,800 round figure.

On the flip side, any subsequent move up is likely to confront stiff resistance near the $1,875 region. This is followed by the $1,900 round-figure mark. The latter should act as a pivotal point, above which a bout of a short-covering could lift the Gold price to the $1,925-$1,930 congestion zone.

Key levels to watch