Gold Price Forecast: XAU/USD retraces losses as US yields and Oil prices ease

Gold (XAU/USD) retraces Monday’s losses on Tuesday, favoured by a softer US Dollar (USD) as US Yields ease from highs and Oil prices pull back, with investors awaiting key US inflation reports later in the week for a better assessment of the Federal Reserve’s (Fed) near-term policy. The XAU/USD pair has bounced up from the $4,150 area but remains below the top of the last two weeks' trading range, at $4,230.

The US Dollar Index (DXY), which measures the value of the USD against a basket of six majors, dropped 0.25% on Tuesday, amid a mild pullback in US Treasury yields and a moderate reversal in Oil prices. Correlation studies suggest that precious metals appreciate in these circumstances, although the frail market mood suggests that  US Dollar dips are likely to remain limited.

Investors might be trimming US Dollar longs ahead of the release of US Consumer Price Index (CPI) figures due on Wednesday, and the Producer Price Index on Thursday.

Cleveland Fed President (Fed) Beth Hammack reiterated her call for higher interest rates earlier on Tuesday, but with no relevant impact on US Dollar crosses or precious metals. Recent data has practically discarded a Fed rate hike in October, only a 20% chance, according to the FedWatch Tool, but hopes of a December hike are still alive. The market will analyse this week’s data to confirm that scenario.

Technical Analysis: Bulls need to break $4,230 resistance to confirm a trend shift

XAU/USD has returned to the $4,190 area after bouncing from the broken trendline at the $4.150 area on Monday. This is a bullish sign, but it needs confirmation with a successful break of the October top, around $4,230. Momentum indicators on 4-hour charts show a moderately constructive stance, with the Relative Strength Index (14) hovering in neutral-to-positive territory and the Moving Average Convergence Divergence (MACD) indicator stabilizing in mildly positive ground, but the pair seems to need additional impulse to break the overhead resistance.

Above $4,230, the next bullish targets are the September 25 high, at the $4,310 area, and the mid-September highs around $4,400. On the downside, a break of the mentioned trendline, now at $4,135, would give fresh hopes for bears to retest last week's lows, at $4,071, ahead of the support area around the $4,000 psychological level.