Gold Price Forecast: XAU/USD retreats towards $1,850 amid US inflation woes, mystery object inspired fears

• Gold price fades Friday’s bounce off 61.8% Fibonacci golden ratio.
• Sour sentiment underpins US Dollar, weighs on XAU/USD, even as US Treasury bond yields dribble.
• Fed speak fails to bolster hawkish bias but US inflation expectations anchor rate hike concerns and tease Gold sellers.

Gold price (XAU/USD) remains depressed around $1,860 as sour sentiment underpins the US Dollar rebound during early Monday. Also exerting downside pressure on the XAU/USD could be the fears surrounding the US-China ties, as well as anxiety ahead of the US Consumer Price Index (CPI) for January.

While portraying the mood, the S&P 500 Futures fade the previous day’s corrective bounce off a one-week low, down 0.35% around 4,080 at the latest, whereas the US 10-year Treasury yields remain sidelined near 3.73% after refreshing a five-week high on Friday.

It should be noted that the fears about the mystery objects flying over the US and China have recently weighed on the sentiment, even as the US General turned down allegations on Beijing. US General turned down the market’s fears of Chinese spying on the US and the likely rush towards the safe havens by saying, “(We) have no reason to think latest objects are Chinese.” Even so, the fact that the US shot down nearly four such objects while China prepares to hit one keeps the matters on the geopolitical table and roil the risk profile.

Elsewhere, Philadelphia Federal Reserve President Patrick Harker pushed back the chatters of a Fed rate cut during 2023. However, the policymaker did mention, “Fed not likely to cut this year but may be able to in 2024 if inflation starts ebbing.”  His comments were mostly in line with Fed Chair Jerome Powell’s cautious optimism and hence challenge the US Dollar buyers.

However, the US inflation expectations per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) remain firmer around the monthly highs and underpin the hawkish Fed bias, which in turn favor the US Dollar and exert downside pressure on the Gold price.

Moving on, Gold traders may witness further downside but the pace might be slow ahead of Tuesday’s US CPI. Should the scheduled US inflation data print strong numbers, hawkish Fed concerns could drown the XAU/USD price. Alternatively, softer US CPI may renew policy pivot talks and trigger the Gold price rebound.

Gold price technical analysis

Gold’s failure to cross the seven-week-old previous support drags the XAU/USD towards the 61.8% Fibonacci retracement level of December 22, 2022, to February 06, 2023 upside, also known as the Fibonacci golden ratio. Other than the failure to cross the key hurdle, sluggish oscillators also favor metal sellers.

Adding strength to the support-turned-resistance line is the 50% Fibonacci retracement level of $1,872.

It’s worth noting that the Gold’s ability to cross the $1,872 resistance confluence isn’t going to welcome the bulls as the 200-Simple Moving Average (SMA) will challenge the further upside near $1,890.

Alternatively, the aforementioned Fibonacci golden ratio near $1,852 appears immediate support for the Gold price ahead of the January 05 swing low near $1,825.

In a case where XAU/USD remains weak past $1,825, a horizontal area comprising multiple levels marked since late December, around $1,820, could challenge the metal bears.

Gold price: Four-hour chart

Trend: Further downside expected