Gold Price Forecast: XAU/USD rebounds but upside appears limited ahead of US inflation

Gold price turned south on Thursday after witnessing a Doji candlestick at five-day highs of $1,793 a day before. Wednesday’s price action suggested that buyers could be facing bullish exhaustion, which got confirmed by the previous day’s drop to $1,773. The pullback in gold price came on the back of a broad-based US dollar rebound. Uncertainty over the Omicron covid variant, as well as, looming central banks’ decision hit the market mood and lifted the haven demand for the greenback. Although the losses were capped by the negative US stocks and Treasury yields.

Investors remain cautious and refrain from placing any directional bets on the bright metal heading into the all-important US inflation data due this Friday. Hotter US inflation data is likely to prompt the Fed to reduce its bond-buying at a faster pace, eventually paving the way for a rate hike next year. In the wake of the hawkish Fed expectations, traders are resorting to repositioning, fuelling a bounce in gold price. However, the renewed upside in the US Treasury yields combined with the cautious market mood will likely check gold’s recovery attempts. The US inflation, consumer sentiment data and Omicron updates will be crucial for trading gold price on Friday.

Gold Price Chart - Technical outlook

Gold: Daily chart

Gold price continues to remain capped by the powerful resistance – the confluence of the 100- and 200-Daily Moving Averages (DMA) at $1,792 so far this week.

A downbeat US CPI report could weigh on the US dollar and the Fed’s hawkish bets, lifting gold price finally above aforesaid barrier on a sustained basis.  

The 14-day Relative Strength Index (RSI), however, remains below the 50.00 level, suggesting that the bears will likely retain control in the sessions ahead.

Only a daily closing above the key confluence will open doors for further recovery, with the next immediate hurdle seen at 50-DMA, now at $1,796.

The bulls will then target the $1,800 figure. Should the recovery gain traction, a retest of the November 30 high at $1,809 would be on the cards.  

On the flip side, immediate support is seen at the previous day’s low of $1,773. The November 3 low at $1,766 could then be on buyers’ radars.

Gold bulls remain hopeful while above the horizontal trendline support pegged at $1,760.