Gold Price Forecast: Tide turns in favor of XAU/USD bears amid inflation fears

• Gold price kicks off the week on the wrong foot as US Dollar extends recovery.
• The oil price surge rekindles inflation fears, drives Treasury yields higher.
• Gold price teases a pennant breakdown, focus on daily close and United States ISM PMI.

Gold price is meandering in multi-day lows near the $1,950 level early Monday, as sellers take a breather before the next push lower. Gold price is extending Friday’s sell-off from near the $1,990 region amid the ongoing recovery in the United States Dollar (USD).

United States Dollar rises with Treasury bond yields

Gold price is seeing a negative start to a holiday-shortened week, as the US Dollar is recovering further ground against its major peers amid broad risk aversion. The previous week’s recovery momentum in the US Dollar gained additional strength early Monday after the US Dollar climbed with the US Treasury bond yields, as the unexpected output cut from OPEC and its allies (OPEC+) sent oil prices about 6% higher and rekindled inflation fears. Gold price, therefore, came under renewed selling pressure and dropped further to test the $1,950 psychological mark.

The US Dollar saw a turnaround late last week even though the United States Core PCE Price Index came in a tad softer at 4.6% YoY in February vs. 4.7% expected. The data is the US Federal Reserve’s (Fed) preferred inflation measure but it failed to deter the US Dollar bulls. Gold price failed to find any support from the downtrend in the US Treasury bond yields last week, as sellers continued to lurk below the $2,000 supply zone.

United States ISM Manufacturing PMI coming up

Looking ahead, Gold traders await the release of the ISM Manufacturing PMI and Price Paid sub-component from the United States later in the North American session for fresh hints on the strength of the US economy, which is likely to impact the next Federal Reserve policy move.

Meanwhile, fears over the banking sector crisis have eased but inflation concerns are back in play amid surging oil prices. Therefore, the oil price action and the broader risk sentiment will also play a pivotal role in influencing the US Dollar and Gold price dynamics. Further, speeches from Federal Reserve officials could also steal the limelight.

Gold price technical analysis: Daily chart

As observed on the daily sticks, the Gold price rebound from the critical rising trendline support, then at $1,958 fizzled on Friday, as sellers fought back control.

Eventually, Gold price breached the abovementioned support, now at $1,961, on an extended sell-off early Monday.

However, Gold bears need a daily candlestick closing below the latter to confirm a downside break from a two-week-old pennant formation.

If that materializes, then a fresh downswing toward the previous week’s low of $1,944 cannot be ruled out. Further south, the static support at $1,935 will come into play.

Nevertheless, with the 14-day Relative Strength Index (RSI) still holding above the midline, Gold bulls could find some bargain flows at lower levels, capping the downside.

In case, the Gold price recovery is initiated, bulls will need to recapture the aforesaid trendline support at $1,961 on a sustained basis. The next upside target is seen at the $1,970 round figure.

The falling trendline resistance at $1,993 will be a tough nut to crack for Gold optimists.