Gold Price Forecast: XAUUSD seems poised to challenge 200-day SMA, around $1,800 mark

• Gold settles near a three-month high on Monday, though it lacks bullish conviction.
• Rebounding US bond yields underpins the USD and caps the upside for the metal.
• Bets for less aggressive Fed rate hikes seem to act as a tailwind for the XAUUSD.

Gold attracted some dip-buying near the $1,753 area on Monday and settled near its highest level since mid-August, though a stronger US Dollar kept a lid on any further gains. The US Treasury bond yields edged up in reaction to Federal Reserve Governor Christopher Waller's hawkish remarks on Sunday, saying that the central bank will not soften its fight against inflation. The two-year US government bond yield, highly sensitive to rate hike expectations, posted its biggest daily gain since November 3. This assisted the USD in stalling the post-US CPI slump to a nearly three-month low and undermined the dollar-denominated commodity.

That said, a surprise drop in the US consumer inflation in October lifted hopes for a less aggressive policy tightening by the Fed. The bets were reaffirmed by Fed Vice Chair Lael Brainard, indicating that the US central bank is likely to hike rates at a slower pace in the coming months. Fed fund futures are now pricing a 91% chance of a 50 bps rate hike at the next FOMC meeting in December. To a larger extent, this helped offset a stronger greenback and continued lending some support to the non-yielding yellow metal. Gold, however, lacks any follow-through buying and remains below the $1,775 level through the Asian session on Tuesday.

Traders seem reluctant to place aggressive directional bets amid mixed signals from China. Economic data released earlier today showed industrial output slowed to 5.0% YoY in October from 6.3% growth in September. Separately, Chinese Retail Sales recorded the first drop since May and unexpectedly fell by 0.5% during the reported month. Adding to this, fears that China could impose additional lockdowns in some cities overshadow the latest optimism over an eventual scaling back of restrictive measures. That said, a generally positive tone around the equity markets keeps a lid on any meaningful upside for the safe-haven precious metal, at least for now.

The mixed fundamental backdrop warrants some caution before considering an extension of the recent rally witnessed over the past two weeks. Market participants now look forward to the US economic docket - featuring the release of the Empire State Manufacturing Index and Producer Price Index (PPI). Apart from this, traders will take cues from speeches by influential FOMC members, which, along with the US bond yields, should drive the USD demand and provide some impetus to gold.

Technical Outlook

From a technical perspective, last week's convincing break through the 100-day SMA - for the first time since May - was a fresh trigger for bullish traders. Furthermore, acceptance above the $1,750 area and the emergence of some dip-buying on Monday add credence to the positive outlook. Hence, a subsequent strength towards reclaiming the $1,800 psychological mark, nearing the very important 200-day SMA, looks like a distinct possibility. Given that RSI (14) on the daily chart has moved on the verge of breaking into overbought territory, bulls might opt to take some profits off the table near the technically significant moving average.

On the flip side, the overnight swing low, around the $1,753 area, now seems to protect the immediate downside. Any further pullback could be seen as a buying opportunity near the $1,730-$1,725 strong horizontal resistance breakpoint. The latter coincides with the 100-day SMA and should act as a strong near-term base for gold. The sustained weakness below will negate the positive bias and prompt some technical selling, paving the way for a slide back towards the $1,700 round figure. The corrective slide could extend towards the next relevant support near the $1,675-$1,673 region.