Gold Price Forecast: XAU/USD struggle with 50 DMA set to continue ahead of US inflation

Gold price has failed to capitalize on the previous rebound, despite the sustained weakness in the US dollar and the Treasury yields. Bulls have rather turned cautious amid ongoing Chinese military action against Taiwan, global growth fears and in anticipation of the highly-impactful US inflation data due this Wednesday. The bullion traders are likely to remain non-committal below the $1,800 mark and maintain their range-play between $1,750-$1,800 until the US inflation release. The annualized US Consumer Price Index (CPI) for July is expected to show inflation to have eased to 8.7% from 9.1% in June. The US inflation data is likely to shape the Fed rate hike move for the upcoming meetings. A softer US inflation reading could offer the much-needed impetus to gold bulls for crossing the $1,800 threshold, as it would pour cold water on super-sized Fed rate hike expectations. At the moment, markets are pricing a 65% probability of a 75 bps Fed lift-off in September, down about 7% from the day before.

Also read: US CPI Preview: It is the hard core that counts, five scenarios for critical inflation data

XAU/USD started the week on the right footing on Monday, having defied the bearish odds following Friday’s sharp sell-off triggered by the impressive US labor market report. Bumper US Nonfarm Payrolls data jacked up big Fed rate hike calls for next month. But the dollar as well as the yields reversed Friday’s gains and aided the rebound in the bright metal, probably as investors repositioned ahead of the all-important US inflation data. The precious metal also recovered some lost footing, courtesy of the looming recession risks and dour mood on Wall Street indices.

Gold price technical outlook: Daily chart

Technically, nothing seems to have changed for the bullion even though it recaptured the critical downward-sloping 50-Daily Moving Average (DMA), now at $1,787.

A failure to sustain above the latter will open up a renewed downside towards the previous day’s low of $1,771, below which the $1,765 demand area will come into play.

The August 3 high of $1,754 and the $1,750 psychological level will be on sellers’ radars.

The risk appears skewed to the downside as the 100 DMA is probing the 200 DMA for a break lower, which if materializes could confirm a bear cross.

But the 14-day Relative Strength Index (RSI) remains above the midline, keeping XAU bullish interests still underpinned.

Buyers need acceptance above the $1,800 mark to continue with its recovery momentum. Bulls will then guard the July 5 high at $1,812 should the upbeat momentum pick up steam.