Gold Price Forecast: XAU/USD advocates more volatility as yields dribble, inflation data looms

• Gold price funnels down towards the breaking point of a volatility-signaling chart pattern.
• Softer United States Treasury bond yields contrast with the US Dollar rebound to weigh on the XAU/USD.
• Neutral comments from Federal Reserve officials put a floor under the Gold price.
• Easy inflation can keep the XAU/USD buyers hopeful as banking fears fade.

Gold price (XAU/USD) prints mild losses around $1,963 as bulls and bears jostle within a short-term symmetrical triangle ahead of the key inflation release. It’s worth noting that the US Dollar’s rebound allowed the XAU/USD to lure bears the previous day but mixed comments from the Federal Reserve (Fed) officials and the absence of important United States data, not to forget the risk-on mood, challenge the Gold sellers amid Thursday’s sluggish Asian session.

Gold price drop on US Dollar’s rebound

Gold price bears the burden of the US Dollar’s rebound as traders await the key data/events. That said, the US Dollar Index (DXY) marked the first daily gain in three the previous day, down 0.05% intraday near 102.65 by the press time.

A retreat in the US Treasury bond yields joined the quarter-end positioning and cautious optimism in the market to underpin the US Dollar’s latest rebound. Adding strength to the greenback’s rebound could be the geopolitical fears emanating from China, Russia and North Korea. However, an absence of hawkish comments from the Federal Reserve (Fed) officials joins the absence of talks about banking woes to weigh on the US Dollar.

That said, the US 10-year and two-year Treasury yields marked their first daily loss on Wednesday by ending the North American trading session around 3.57% and 4.10% respectively.

It should be noted that the US Dollar gains, as well as the Gold price weakness, could also be linked to the increase in the US inflation expectations, per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED).

Alternatively, the Federal Reserve (Fed) officials’ hesitance in suggesting further rate hikes seems to challenge the greenback buyers, which in turn keeps the Gold buyers hopeful. Bloomberg came out with the news suggesting Fed Chair Jerome Powell showed forecasts for one more rate hike in 2023, which in turn pushed back talks of policy pivot and favor the US Dollar bulls. Though, Vice Chair for Supervision Michael Barr said, “We will be looking at incoming data, financial conditions to make a meeting-by-meeting judgment on rates.”

China-linked fears also weigh on XAU/USD

The recent chatters surrounding the US-China strain due to the US-Taiwan ties also challenge the Gold buyers, due to the dragon nation’s status as one of the world’s biggest XAU/USD consumers. That said, the US blacklisting of Chinese companies and Beijing’s dislike of a meeting between the White House Speak and the Taiwan President can be considered the key news on that matter. On the same line, Bloomberg said that Taiwanese officials are pushing hard for an agreement to eliminate the burden of double taxation, like the US has with dozens of countries. The same could fury China and allow the Gold sellers to keep the reins.

On the other hand, nuclear threats from Russia and North Korea are also challenging the sentiment and the XAU/USD price.

Meanwhile, optimism surrounding the technology and banking sector allows the Gold price to fight back the bears.

Inflation, banking news are crucial for Gold traders to track

Although the recent shift in the Federal Reserve (Fed) tone and the market’s cautious optimism keeps the Gold buyers hopeful, a jump in the US inflation expectations and an absence of dovish comments from major central banks prod the XAU/USD bulls. As a result, today’s preliminary readings of the Harmonized Index of Consumer Prices (HICP) gauge for Germany and the US fourth quarter (Q4) Core Personal Consumption Expenditure (PCE) details will be important to watch for the Gold traders. It’s worth noting that an increase in price pressure pushes the central banks towards higher rates and the same can weigh on the precious metal.

Also read: US February PCE Inflation Preview: Bad news for the Dollar, good news for the Fed?

Gold price technical analysis

Gold price seesaws within a one-week-old symmetrical triangle, suggesting more volatility on the breakout. That said, the impending bull cross on the Moving Average Convergence and Divergence (MACD) indicator joins the hidden bullish divergence between the Relative Strength Index (RSI) line, placed at 14, and the price to lure the XAU/USD bulls.

It’s worth noting that a hidden bullish RSI divergence can be found when the Gold price makes a higher low but the RSI (14) grinds lower.

With this, the XAU/USD is likely to grind higher with the stated triangle’s top line, close to $1,985 at the latest, which acts as an immediate hurdle towards the north. Following that, the $2,000 round figure and the latest peak surrounding $2,010 can test the Gold buyers before directing them to the previous yearly high of $2,070.

Alternatively, a downside break of the aforementioned triangle’s lower line, near $1,950, can trigger a short-term fall in the Gold price. Though, the 100-bar Simple Moving Average (SMA) level of near $1,923 may check the XAU/USD sellers before giving them control.

Gold price: Four-hour chart

Trend: Further upside expected