Gold Price Forecast: XAU/USD holds steady near multi-month peak, US Retail Sales awaited

• Gold struggles around five-month high, retreats of late.
• US-China talks, indecision over Fed rate hike and pre-data anxiety portray sluggish markets.
• DXY tracks Treasury yields to the north as 78.6% Fibonacci retracement, yearly resistance line challenge gold buyers.
• Gold Price Forecast: Bulls in charge and still aiming for $1,900

Update: Gold struggled to preserve its modest intraday gains back closer to a multi-month peak set on Monday and has now retreated to the lower end of its daily trading range. Currently hovering around the $1,865-64 region, the prospects for an early policy tightening by the Fed turned out to be a key factor that acted as a headwind for the non-yielding yellow metal. Apart from this, the recent strong US dollar rally to 16-month tops further collaborated to cap the upside for the dollar-denominated commodity.

Meanwhile, worries about a faster than expected rise in inflationary pressure continued weighing on investors' sentiment. This was evident from the cautious mood around the equity markets, which extended some support to the safe-haven gold. Market participants now look forward to the US economic docket, highlighting the release of monthly Retail Sales figures for a fresh impetus later during the early North American session. Apart from this, the US bond yields, the USD price dynamics and the broader market risk sentiment would further allow traders to grab some short-term opportunities around the precious metal.

Previous update: Gold price is heading back towards the key $1,870 resistance zone, as the US dollar retreats in tandem with the Treasury yields amid improving market mood. Investors remain hopeful, with the virtual meeting between US President Joe Biden and his Chinese counterpart Xi Jinping underway. Both leaders look to ease the tense relationship by pledging more communication.

Additionally, gold bulls are bidding up ahead of the critical US Retail Sales release, with the daily technical setup pointing to more gains in the offing. The 100-Daily Moving Average (DMA) is set to cross the 200-DMA for the upside, signalling a potential bull cross. Meanwhile, the persistent global inflationary concerns and expectations of the Fed’s rate hike timing continue to have a significant bearing on the bright metal.

Gold (XAU/USD) takes offers to refresh intraday low, following an uptick to refresh a five-month high. That said, the yellow metal trades near $1,862 by the press time of Tuesday’s Asian session.

The commodity buyers initially cheered upbeat market sentiment to renew the multi-day top during early Monday before the heavy run-up in the US Treasury yields and firmer US Dollar dragged the gold prices. Also challenging the quote is the market’s cautious mood ahead of the key US Retail Sales for October, expected to reprint the 0.7% MoM growth.

Read: US Retail Sales Preview: Win-win for the dollar? Three scenarios, only one dollar-negative

That said, the US 10-year Treasury yields jumped to a fresh three-week high, underpinning the US Dollar Index rally to renew the yearly top. However, the Wall Street benchmarks traded mixed and restrict the initial moves of the S&P 500 Futures.

Although optimism surrounding the US-China talks and US stimulus favor the gold buyers, the Fed rate hike concerns challenge the metal’s upside momentum. US President Joe Biden formally signed his $1.0 trillion bi-partisan infrastructure bill but a 16-year high number of the US inflation expectations keep reflation woes on the top despite the Fed policymakers’ rejections. Recently, Richmond Federal Reserve Bank President Thomas Barkin said, “If ‘need is there’ Fed will act to curb inflation, but good to have a few more months ‘to see where reality is.’”

Adding to the risk catalysts is the optimism surrounding the US-China talks. That said, US President Joe Biden and his Chinese counterpart Xi Jinping are up for a virtual meeting after multiple months of silence among the world’s top two economies.

Moving on, the qualitative factors may keep the gold buyers entertained, likely challenged, ahead of the key US data.

Technical analysis

Despite refreshing the multi-day top, gold fails to provide a daily closing beyond a descending trend line from January and 78.6% Fibonacci retracement (Fibo.) of June-August downside.

In addition to the key Fibo. and the yearly resistance line, overbought RSI conditions also challenge gold buyers around the key $1,867-68 level.

Also challenging the gold buyers past $1,868 is the $1,900 threshold and June’s swing high near $1,917, a break of which will test the yearly peak of $1,959.

Alternatively, pullback moves may aim for the 61.8% Fibonacci retracement level around $1,830.

Should gold sellers dominate past $1,830, October’s high near $1,813 will be in focus. It’s worth noting that the tops marked in July and September around $1,834 add to the downside filters.

To sum up, gold remains bullish but a pullback can’t be ruled out.

Gold: Daily chart

Trend: Pullback expected