Gold Price Forecast: XAU/USD has room to rise towards $1765-$1770, US Consumer Sentiment awaited

Gold price extended the previous recovery momentum into the first half of Thursday’s trading and went to hit fresh three-day highs at $1758. The US dollar remained on the defensive amid fading hawkish Fed expectations, in light of softer-than-expected US Consumer Price Index (CPI) data. However, the tide turned in favor of gold bears after the US Producer Price Index (PPI) came in higher than expected and revived the Fed’s tapering bets, lifting the dollar alongside the Treasury yields. A tepid 30-year auction also put a fresh bid under the 10-year US yields, capping gold’s recovery. Gold price closed the day at $1753, marginally higher on the day. The narrative over a potential Fed’s monetary policy normalization continued to drive the sentiment around the dollar and gold price.  

On the final trading day of the week, the greenback is tracking the weakness in the US rates, as the ongoing spread of the Delta covid variant and Chinese regulatory curbs dent the appetite for higher-yielding assets. Therefore, gold price has regained the bullish momentum, although the bulls remain cautious ahead of the US Preliminary Michigan Consumer Sentiment data, which is seen steady at 81.2 in August. A downside surprise on the US sentiment gauge could weigh on the Fed’s tapering expectations, bossing well for gold price. Meanwhile, a broader market consensus that the Fed will unveil its tapering plan next month also keeps gold price in a familiar range above $1750 ahead of the key event risk this Friday.

Gold Price Chart - Technical outlook

Gold: Four-hour chart

Gold’s four-hour technical chart shows that the Relative Strength Index (RSI) is edging higher, having recaptured the 50.00 level.  

Gold price, therefore, has room to rise towards the horizontal trendline resistance at $1766, above which the 50-Simple Moving Average (SMA) at $1771.

A weekly closing above the latter will call for a retest of the $1800 mark, negating the near-term bearish bias.

On the flip side, the immediate downside is cushioned by the $1750 psychological level. A firm break below the latter could bring the 21-SMA at $1742 back in the sellers’ sight.

Deeper losses towards the August 11 low of $1724 could be in the offing should the downside momentum accelerate.