Gold Price Forecast: XAU/USD stays pressured around $1,850 with eyes on US Inflation

Gold Price (XAU/USD) licks US NFP-led wounds around mid-$1,800s during the initial Asian session on Monday, with eyes on this week’s US Consumer Price Index (CPI). The metal’s corrective pullback could also be linked to the risk-positive headlines concerning China’s covid conditions and the US-China trade relations.

Beijing is up for further easing of covid-linked activity controls from Monday after witnessing a sustained fall in the virus numbers, following Shanghai’s ease of lockdown measures late in May. “Dine-in service in Beijing will resume on Monday, except for the Fengtai district and some parts of the Changping district, the Beijing Daily said. Restaurants and bars have been restricted to takeaway since early May,” reports Reuters.

Elsewhere, chatters over the US lifting of some tariffs on China, mainly announced during Donald Trump’s reign, also underpin the gold price recovery. “US Commerce Secretary Gina Raimondo said on Sunday that President Joe Biden has asked his team to look at the option of lifting some tariffs on China that were put into place by former President Donald Trump, to combat the current high inflation,” per Reuters.

It should be noted that gold prices dropped around 1.0% on Friday after the US Nonfarm Payrolls (NFP) surprised markets. Also exerting downside pressure on the bullion were the hawkish comments from Cleveland Fed President Loretta Mester.

That said, US Nonfarm Payrolls (NFP) came in 390K for May, more than 325K expected but lesser than the upwardly revised 428K previous readouts. Further, the Unemployment Rate remained unchanged at 3.6% versus expectations of a slight decline to 3.5%. Additionally, the US ISM Services PMI fell to 55.9 in May, versus 56.4 market consensus and 57.1 flashed in April.

On the other hand, Fed’s Mester said, per Reuters, “The one problem that the Fed has is inflation.” The policymakers also added that the risks of a recession have gone up, said the news. Loretta Mester also mentioned that she supports 50 bps increases in June and July while not ruling it out in the September meeting, but it would be data-dependent. She said that if she sees compelling evidence of lower inflation, then a 25 bps hike in September would be appropriate.

Amid these plays, Wall Street benchmarks closed in the red whereas the US 10-year Treasury yields posted the first weekly gain in three.

Moving on, the monetary policy meeting of the European Central Bank (ECB) and the US Consumer Price Index (CPI) are the key data/events for the week amid chatters of central bankers’ aggression in taming the price pressure, which in turn could weigh on gold prices.

Technical analysis

Gold’s pullback from 200-SMA, coupled with the steady RSI, hints at the quote’s further weakness toward the key $1,836-35 short-term support confluence, including the 23.6% Fibonacci retracement of the April-May fall, as well as a three-week-old rising support line.

It should be noted, however, that a clear break of $1,835 won’t hesitate to drag the precious metal towards May’s low surrounding $1,786, with the $1,800 threshold likely acting as an intermediate halt.

Alternatively, a clear upside break of the 200-SMA, near $1,865 now, could propel the quote towards a horizontal area established in late April at around $1,915.

During the rise, the $1,900 round figure may probe the XAU/USD buyers while the April-end swing high near $1,920 might offer an additional filter to the north before welcoming the bulls.

Gold: Four-hour chart

Trend: Further weakness expected