Gold Price Forecast: XAU/USD treads waters above $1,900 to retrace recent losses

Gold price attempts to snap a two-day losing streak, edging higher around $1,910 per troy ounce during the Asian session on Thursday after Consumer Price Index (CPI) data from the United States (US).

US Consumer Price Index (CPI) (YoY) exceeded expectations, rising to 3.7% from the previous rate of 3.2%, surpassing the market's anticipated 3.6% for August. Furthermore, the monthly core CPI showed improvement, increasing to 0.3% from the prior 0.2% for the same month. This increase was unexpected, as market expectations had been for it to remain unchanged.

However, the annual core inflation rate aligned with expectations, holding steady at 4.3%, consistent with the previous figure of 4.7%.

The data suggests that while overall inflation may be moderating, the Core Consumer Price Index (CPI) remains relatively stable. This information initially led to a rise in US Treasury yields, but those gains were later retraced. The market sentiment seemed to improve with the belief that the US Federal Reserve (Fed) will maintain a dovish stance in its September meeting.

This dovish sentiment has provided support for the prices of Gold, as investors seek alternative stores of value. This has contributed to the weakening of the US Dollar (USD).

CME FedWatch Tool indicates that the Fed is likely to maintain interest rates within the range of 5.25% to 5.50% for the September meeting. This suggests that market participants are increasingly anticipating a more dovish stance from the Fed in the near term.

Despite the diminished probability of an interest rate hike in September, there is a 40% likelihood of a 25 basis points (bps) rate increase by the Federal Reserve (Fed) in November. This suggests that market sentiment is increasingly inclined towards the Fed pursuing a monetary tightening policy later in the year, potentially in November. Investors turn cautious about the possibility of such a move as they assess the evolving economic landscape and Fed statements.

While an immediate rate hike in September may not be on the horizon, investors are anticipating the possibility of such a move in the near future, likely in November or beyond. This reflects the ongoing uncertainty and evolving expectations regarding Fed policy decisions.

US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against a basket of the other major six currencies, is reversing some of the gains it made in the previous trading session. The spot price is trading lower around 104.60 at the time of writing. This suggests that the US Dollar may be facing some selling pressure or a correction after its recent strength.

Market participants are currently directing their attention to forthcoming data releases from the United States (US), including the Core Producer Price Index (PPI) and Retail Sales figures for August.

These economic indicators will provide valuable insights into the state of economic activity in the US and are likely to influence trading decisions and market sentiment, particularly concerning the Greenback.