Gold Price Forecast: XAU/USD rebounds to $1,700 with eyes on US inflation, Fed Minutes

• Gold price struggles to keep pullback from the monthly high, rebounds from short-term key supports.
• Hawkish Fed bets, geopolitical concerns underpinned the US dollar’s demand.
• Firmer US jobs report, mixed concerns in the EU add strength to the USD buying.
• Softer inflation numbers may probe bears but Fed hawks could weigh on XAU/USD.

Gold price (XAU/USD) begins the week on a front foot, bouncing off the 200-SMA support to $1,700 while also keeping the previous pullback from the monthly high amid hawkish Fed bets and geopolitical concerns. However, cautious sentiment ahead of Wednesday’s Fed Minutes and Thursday’s US inflation data challenge the commodity bears.

XAU/USD began the last week on the positive side before recalling the bears on Wednesday as Europe levied more sanctions on Russia while the UK announced the reversal of its controversial tax cut plan. Adding strength to the gold selling were the firmer US job numbers and strongly hawkish comments from the Fed policymakers. Recently, an explosion on a Crimea bridge and China’s downbeat PMI data seemed to have favored the gold sellers.

Friday’s jobs report for September showed that the headline Nonfarm Payrolls (NFP) rose to 265K versus the 250K expected. Also portraying the strength of the US employment conditions was an unexpected fall in the Unemployment Rate to 3.5% compared to forecasts suggesting no change in the 3.7% prior.

Considering the firmer US data and hawkish Fedspeak the market expectations of witnessing a 0.75% rate hike in the next Federal Open Market Committee (FOMC) became stronger of late. Elsewhere, downbeat EU PMIs and the European Central Bank’s (ECB) Monetary Policy Accounts showing support for the 50 basis points (bps) rate hike, versus 0.75% announced, also favored the US dollar and weighed on the XAU/USD prices.

During the weekend, China’s Caixin Services PMI for September dropped to 49.3 from 55.0 prior. With this, the private activity gauge marked the first contraction since May. It’s worth noting that an explosion destroyed a part of the bridge in Crimea which is crucial for Russia's war supplies and escalated the market Russia-Ukraine tension.

Amid these plays, the US Treasury yields regain upside momentum whereas the equities witnessed the red.

Moving on, Monday’s holiday in the US, Canada and Japan could restrict the metal’s momentum while allowing the bears to keep the reins. However, the US FOMC Minutes and US Consumer Price Index (CPI) will be crucial for near-term trade directions. That said, softer inflation data may challenge the XAU/USD sellers but hawkish Fed bets can keep the metal bears hopeful.

Also read: Gold Weekly Forecast: XAU/USD remains sensitive to US yields as focus shifts to CPI

Technical analysis

Gold price flirts with the 200-SMA support, around $1,695 by the press time, after breaking an eight-day-old support line. Also keeping the XAU/USD bears hopeful are the downbeat RSI (14) and bearish MACD signals.

That said, the metal’s further downside hinges on the previous resistance line from late August and the 100-SMA, close to $1,684 and $1,672 in that order. It’s worth noting that the metal’s downside past $1,672 could convince the bullion sellers.

Alternatively, the support-turned-resistance line from September 28, around $1,723 by the press time, guards the quote’s immediate recovery.

Following that, the recent top and the 61.8% Fibonacci retracement level of the metal’s August-September downside, close to $1,730 and $1,735 in that order, could challenge the XAU/USD buyers before giving them control.

Overall, the gold price returns to the bear’s table but there’s a bumpy road to the south.

Gold: Four-hour chart

Trend: Further downside expected