Gold Price Forecast: XAU/USD defends monthly resistance break above $1,700, US inflation eyed

• Gold price stay firmer above short-term key hurdle, approaches 21-DMA.
• US dollar pullback joined firmer equities, sluggish yields to underpin XAU/USD run-up.
• Hawkish Fedspeak, geopolitical fears fail to recall gold sellers.
• Light calendar ahead of Tuesday’s US CPI could allow buyers to keep reins.

Gold price (XAU/USD) begins the week’s trading on the front foot around $1,717, after positing the first weekly gains in four. The metal’s latest upside could be linked to the US dollar’s broad weakness despite the hawkish Fedspeak. The reason could be linked to the market’s consolidation of the bullish bias amid hopes of overcoming the inflation woes.

Given the recently easing early signals of the inflation data from major economies, in contrast with firmer macros in other areas, market players seem to have gained confidence that the global central bankers will be able to tame the price pressure. In doing so, they manage to accept the hawkish comments/actions by the European Central Bank (ECB) and the US Federal Reserve (Fed).

Having witnessed the ECB’s 0.75% rate hike and Fed Chairman Jerome Powell’s push for more rate lifts, multiple Fed policymakers promoted tighter monetary policies in their last speeches before the pre-Fed blackout.

Among them, Federal Reserve Governor Christopher Waller was the prominent one as he said on Friday that he supports another significant hike in two weeks. On the same line was Kansas City Fed President Esther George saying, as reported by Reuters, “Case for continuing to remove policy accommodation is clear cut.” Furthermore, Cleveland Federal Reserve Bank President Loretta Mester said, “One inflation report is insufficient to alter one's outlook.” The policymaker also stated that he sees policy rates rising slightly above 4% by early 2023.

Elsewhere, US Treasury Secretary Janet Yellen mentioned that, during the CNN interview on Sunday, “Fed is going to need skill and luck to bring inflation down while maintaining labor market strength.” The policymaker also mentioned that the US consumers could experience a spike in gas prices in winter when the European Union significantly cuts back on buying Russian oil.

On a different page, Russian retreat from some of the Ukrainian territory and the Sino-American tussles are likely challenging the gold buyers amid fears of further tension.

Amid these plays, Wall Street marked another positive day and the US Treasury yields remained sluggish for the 10-year period, while being firmer for the two-year tenure.

Technical analysis

A daily closing beyond one-month-old resistance line, now support around $1,710, joins firmer RSI and an impending bull cross on the MACD to keep gold buyers hopeful.

That said, the 21-DMA hurdle surrounding $1,730 appears immediate resistance to watch for the XAU/USD bulls ahead of the August 25 swing high near $1,765.

Following that, a three-month-old descending trend line resistance near $1,775 could serve as the last defense for the gold sellers.

Meanwhile, a downside break of the $1,710 could defy the bullish breakout and direct gold sellers towards the $1,700 round figure.

In a case where the XAU/USD bears keep reins past $1,700, the latest low near $1,688 will precede the yearly bottom of $1,680 to challenge the metal’s further declines.

Additionally, the 61.8% Fibonacci Expansion (FE) of the bullion’s late April to early August moves, close to $1,660, might restrict the quote’s extra downside.

Gold: Daily chart

Trend: Limited upside expected