Gold Price Forecast: XAU/USD marches past $1,650 on falling wedge breakout, US PCE inflation eyed

• Gold price picks up bids on confirming a bullish chart formation.
• Firmer yields, downbeat equities failed to tame XAU/USD buyers amid softer DXY.
• Geopolitical risks join recession woes, hawkish central bankers to probe gold buyers.
• Fed’s favorite inflation data can challenge the upside momentum on firmer readings.

Gold price (XAU/USD) braces for the first weekly gain in three as the metal buyers poke $1,663 after witnessing a confirmation of the falling wedge bullish chart pattern the previous day. In doing so, the yellow metal cheers softer US dollar but fails to respect the market’s grim conditions.

That said, US Dollar Index (DXY) marked another negative day to refresh the weekly low of around 111.95. The greenback’s gauge versus the major six currencies dropped after the final readings of the US Q2 Gross Domestic Product (GDP) confirmed the initial forecasts of -0.6%.

It should be noted that the firmer prints of the US Weekly Initial Jobless Claims, which dropped to 193K for the period ended on September 24, versus the 209K previous (revised from 213K) and the market expectation of 215K, also might have weighed on the DXY. The US Jobless Claims slumped to the lowest levels since April.

While respecting the data, St. Louis Federal Reserve Bank President James Bullard praised the slump in the weekly Initial Jobless Claims and mentioned, "We will push inflation to 2% in a reasonable compact time frame." Elsewhere, Federal Reserve Bank of Cleveland President Loretta Mester said on Thursday that they are not yet at a point where they could start thinking about stopping interest rate hikes, as reported by Reuters.

In addition to the hawkish Fedspeak, fears emanating from the UK, Russia and China also challenge the sentiment and the XAU/USD bulls but couldn’t chain the prices.

Comments from Bank of England Chief Economist Huw Pill amplified pessimism surrounding Britain as the policymaker said, “It’s hard to avoid the conclusion that fiscal easing announced will prompt a significant and necessary monetary policy response in November.” On the other hand, record high German inflation, Russia’s readiness to annex more parts of Ukraine and the chatters over China’s inability to tame recession woes were also challenging the risk appetite.

Amid these plays, the Wall Street benchmarks reversed all of the gains made on Wednesday while the Treasury yields recovered.

Given the recently surprising gold price strength, may be due to the quarter-end positioning, the traders will pay close attention to the Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index for September, expected 4.7% YoY versus 4.6% prior. Should the actual outcome arrives stronger, the XAU/USD prices may witness hardships in rising.

Also read: US August PCE Inflation Preview: Will it trigger a dollar correction?

Technical analysis

Contrary to the grim fundamentals, gold price confirms a three-week-old falling wedge bullish chart pattern recently. The yellow metal’s run-up also takes clues from the steady RSI (14) and an impending bull cross on the MACD, which in turn suggests further advances of the bullion.

That said, the 21-DMA hurdle surrounding $1,681 could challenge the immediate upside ahead of the seven-week-old resistance line, near $1,693.

In a case where the XAU/USD remains firmer past $1,693, it can aim for the theoretical target of the wedge breakout, i.e. near $1,780, wherein the monthly high and the late August peak, respectively around $1,75 and $1,765, can test the bulls.

Alternatively, pullback remains elusive beyond $1,647, a break of which could defy the bullish bias and drag the quote towards the $1,600 threshold.

It should be noted that a downward sloping support line from mid-May, around $1,568 by the press time, could restrict the XAU/USD weakness past $1,600.

Gold: Daily chart

Trend: Further upside expected