Gold Price Forecast: XAU/USD rebound eyes $1,800 as US inflation expectations probe Fed hawks

• Gold price bounces off one-month-old support line to pare the biggest daily loss in 10 weeks.
• US inflation expectations challenge hawkish hopes from Federal Reserve.
• Optimism surrounding China adds strength to XAU/USD recovery.

Gold price (XAU/USD) remains in recovery mode around $1,778 as the US Dollar struggles to keep the week-start upside during early Tuesday. In addition to the greenback’s moves, the technical analysis also favors the bullion buyers to keep the reins even as the markets dwindle pre-Fed blackout of the policymakers.

On Monday, US ISM Services PMI rose to 56.5 in November versus 53.1 market forecast and 54.4 previous readings whereas the Factory Orders also registered 1.0% growth compared to 0.7% expected and 0.3% prior. Further, S&P Global Composite PMI improved to 46.4 versus 46.3 initial estimations while the Services counterpart rose to 46.2 compared to 46.1 flash forecasts.

On Friday, the US Nonfarm Payrolls (NFP) surprised markets by rising to 263K versus 200K expected and an upwardly revised prior of 284K while the Unemployment Rate matched market forecasts and prior readings of 3.7% for November. Following the upbeat data, Chicago Fed President Charles Evans said, "We are probably going to have a slightly higher peak to Fed policy rate even as we slow pace of rate hikes.”

It should, however, be noted that a surprise retreat in the US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data,  from a one-month high challenge the recently hawkish bias over the US Federal Reserve’s (Fed) next move. The latest prints of the 5-year and 10-year inflation expectations portray a pullback from the one-month high to 2.46% and 2.39% respectively.

Elsewhere, hopes that China would soon dial back its strict Zero-COVID policy seemed to have favored the market’s optimism. China is set to announce a further easing of some of the world's toughest COVID curbs as early as Wednesday, Reuters quotes an anonymous source to report.

Against this backdrop, S&P 500 Futures print 0.20% intraday gains around 4,011 while snapping a three-day downtrend. That said, the US 10-year Treasury bond yields fade the bounce off an 11-week low marked the last Friday, down three basis points (bps) to 3.56% by the press time.

Moving on, Gold may witness further recovery amid a likely sluggish day but concerns surrounding China and the Fed appear important for near-term directions.

Gold price technical analysis

Gold reverses the previous day’s U-turn from a six-month-old horizontal resistance, around $1,805-07 as it bounces off an upward-sloping support line from early November, around $1,765 by the press time. Also keeping the buyers hopeful is the steady RSI and sluggish MACD signals.

It should, however, be noted that the 61.8% Fibonacci retracement level of the bullion’s June-September downside, near $1,778, as well as the 200-DMA hurdle surrounding $1,795, also act as upside filters.

Meanwhile, a downside break of the aforementioned support line near $1,765 won’t hesitate to direct the Gold price toward the late November swing low of around $1,721.

During the fall, the tops marked during September and October, around $1,735 and $1,730, could act as an intermediate halt.

Overall, Gold is likely to remain firmer but the upside room appears limited.

Gold price: Daily chart

Trend: Further upside expected