Gold Price Forecast: XAU/USD down but challenges 21-day SMA holds

• Gold price holds Friday’s rebound, near $2,500, as the US CPI week kicks in.
• The US Dollar tracks US Treasury bond yields uptick amid a modest risk-recovery.  
• Gold price stays confined between two key barriers but bullish RSI keeps buyers hopeful.

The gold price is trading just shy of the $2,500 mark early Monday, consolidating Friday’s late rally. The gold price remains within its typical range as traders await the US Consumer Price Index (CPI) data, which is anticipated later this week and will confirm the extent of the Federal Reserve’s (Fed) interest rate cut next week.


Gold price bides time, supported by dovish Fed bets.

The gold price holds around the important short-term daily support level, presently at $2,498, aided by a broadly risk-averse market environment, despite a rebound in US equity futures in early trading.


Softer-than-expected China’s inflation numbers increase demand concerns in the world’s largest consumer, fueling speculation that Chinese authorities may implement additional stimulus measures to boost economic growth, bolstering the non-yielding gold price.

In August, China’s inflation rate rose 0.6% year on year, less than the projected 0.7%. Every month, the CPI increased by 0.4%, which was less than the 0.5% projected. Increased wagers on an outsized Fed rate drop this month contribute to the overall positive view for gold prices. However, further recovery in gold prices may be limited if US Treasury bond yields rise somewhat as US stock futures improve, offering new legs to the US Dollar’s (USD) recovery.


The US dollar recovered late on Friday after hitting a new eight-day low versus its major rivals in response to the poor US labor market report. US nonfarm payrolls increased by 142,000, falling short of the expected 160,000 increase. On the other side, the jobless rate decreased to 4.2%, as expected.


Disappointing US job data reignited fears of an impending economic slump, crashing risk assets such as Wall Street indices. The sell-off in US markets fueled haven demand for the greenback, allowing it to make a late rebound.


The risk-off mentality fueled demand for US government bonds, which weighed significantly on US Treasury bond yields on Friday, helping to buffer the drop in gold prices.


Looking ahead, the gold market may extend its range play until Wednesday, when the US inflation data will be released. The report is anticipated to increase volatility around the US dollar and, consequently, the gold price. US inflation data will be crucial in determining the extent of the impending Fed rate drop.