Gold price reverses post-US CPI corrective decline, jumps to over two week peak

• Gold regains positive traction on Friday and stalls the overnight pullback from over a two-week top.
• Retreating US bond yields keeps the USD bulls on the defensive and lends support to the XAU/USD.
• The prospects for further policy tightening by the Fed could cap any further gains for the commodity.

Gold price (XAU/USD) witnessed an intraday turnaround from the $1,885 region, or over a two-week high touched on Thursday and settled near the lower end of its daily range amid reviving bets for more rate hikes by the Federal Reserve (Fed). The big event for global markets over the last 24 hours has been the release of consumer inflation figures from the United States (US), which rose more than expected in September and support prospects for further tightening by the Fed. This led to the sharp overnight rise in the US Treasury bond yields and triggered a massive US Dollar (USD) short-covering rally, which, in turn, was seen as a key factor exerting pressure on the precious metal.

The downfall, however, lacks follow-through, with a modest pullback in the US Treasury bond yields failing to assist the USD to capitalize on the previous day's strong move up and pushing the Gold price higher on the last day of the week. The recent dovish remarks by several Fed officials suggested that the US central bank is nearing the end of its rate-hiking cycle. This puts a lid on the US bond yields, removing some of the driving force behind a strong Greenback. Apart from this, geopolitical issues turn out to be another factor that continues to drive some haven flows and allows the non-yielding yellow metal to climb back closer to the overnight swing high during the early part of the European session.

Market participants now look forward to the Preliminary Michigan US Consumer Confidence Index, which also includes the 5-10-year inflation expectations that have dropped slightly from a peak of 3.1% back in May. This, along with a scheduled speech by Philadelphia Fed President Patrick Harker and the US bond yields, will influence the USD price dynamics and produce short-term trading opportunities around the Gold price on the last day of the week.

Daily Digest Market Movers: Gold price scales higher on sliding US bond yields, softer USD

• Gold price stalls the previous day's post-US CPI retracement slide from over a two-week high amid retreating US Treasury bond yields and a softer US Dollar.
• The recent comments by several Federal Reserve officials raise the uncertainty over the US central bank’s near-term monetary policy outlook. 
• The latest US consumer inflation figures released on Thursday, however, kept the door open for at least one more 25 basis point (bps) lift-off by the end of this year.
• The headline US CPI rose 0.4% in September and the yearly rate held steady at 3.7% as compared to market expectations for a tick lower to 3.6%.
• The Core CPI, which excludes volatile food and energy prices, matched estimates and eased to the 4.1% YoY rate in September, hitting a 24-month low.
• The inflation is still above the Fed's 2% target and supports prospects for further policy tightening, warranting some caution for the XAU/USD bulls.
• Boston Fed President Susan Collins said that the central bank might have to raise rates again to combat inflation as the data underscored uneven progress toward restoring price stability.
• Military clashes between Israel and the Palestinian Islamist group, Hamas, might continue to underpin the safe-haven bullion and remains supportive of the move up.
• Traders now look to Philadelphia Fed President Patrick Harker's speech and the Preliminary Michigan Consumer Sentiment Index for a fresh impetus.
• The precious metal remains on track to register strong weekly gains of a more than 3.5%, the most since mid-March, and snap a two-week losing streak.

Technical Analysis: Gold price could attempt a move towards the $1,900 pivotal handle

From a technical perspective, the emergence of fresh buying ahead of the $1,865 support zone favours bullish traders. That said, technical indicators on the daily chart are yet to confirm a positive bias. This, in turn, warrants some caution before positioning for any further appreciating move. Hence, any subsequent strength is more likely to confront resistance near the overnight swing high, around the $1,885 region. This is closely followed by the $1,900 mark, which if cleared will set the stage for additional gains.

On the flip side, the $1,868-1,865 region might continue to protect the immediate downside ahead of the $1,853-1,850 zone. A convincing break below could drag the Gold price to the $1,835-1,833 region, representing a multi-day-old trading range resistance breakpoint. Some follow-through selling might turn the XAU/USD vulnerable to slide back towards retesting the multi-month low, around the $1,810 zone touched last week.