Gold Price Forecast: XAU/USD eyes US inflation and daily close below 200-DMA

Gold Price is meandering near three-month lows, extending its selling spiral so far this week, as the haven demand for the US dollar remains unabated. Despite the latest downtick in the dollar, the ongoing bullish momentum remains intact amid looming global growth and inflation fears, courtesy of a protracted Russia-Ukraine war and China’s zero Covid policy. The retreat in the US Treasury yields across the curve also appears temporary, as investors resort to repositioning ahead of the critical US Consumer Price Index (CPI) data for April.

The US consumer inflation is seen easing to 8.1% YoY in April vs. 8.5% booked in March. The core CPI is also expected to soften, on an annualized basis, to 6%, although seen edging a tad higher to 0.4% MoM in the reported period. Any signs of inflation peaking in the US economy is likely to temper Fed’s hawkish expectations, which could save the day for gold bulls while extending the dollar’s corrective downside. On the other hand, hotter than expected US inflation readings will push for aggressive Fed rate hikes, supporting the case for a 75 bps June lift-off at gold’s expense.

On Tuesday, the greenback found a fresh impetus from the hawkish comments from the Cleveland Fed President Lorretta Mester, as she said a 75 bps rate hike in June is not off the table. Further, the cautious tone on the Wall Street indices combined with anxiety ahead of the main event risk of this week, the US inflation data, sought investors to seek refuge in the buck. Gold Price tumbled sharply on Tuesday to hit the lowest levels in three months at $1,836, accelerating the decline following a firm break of the $1,850 psychological barrier.

Gold Price Chart: Daily chart

Gold Price is battling the critical 200-Daily Moving Average (DMA) at $1,836 in Wednesday’s trading so far.

Sellers need a daily closing below the latter to extend the sell-off towards the February 10 lows of $1,822.

The next key support is seen at the $1,800 round figure, below which the February lows at $1,769 will be in focus.

The 14-day Relative Strength Index (RSI) is sitting just above the oversold region, allowing room for more declines.

On the flip side, if gold bulls manage to defend the 200-DMA on a daily closing basis, then a rebound towards the previous week low of $1,850 will be inevitable.

Further up, gold buyers will aim for Tuesday’s high of $1,865 on their way to the $1,900 mark.