Gold Forecast: XAU/USD Buyers Failed to Break $1,800 Despite Falling US Bond Yields

• The price of gold records gains for four consecutive weeks, rising 1.08%.
• Weaker US inflation data for the week has investors cheering and hoping the Fed will tighten monetary policy “less.”
• The UoM consumer sentiment report for August beat expectations.
• Gold Price Forecast: The price of gold remains range bound despite broad dollar weakness over the week.

The price of gold erases some of Thursday’s gains, although it remains below $1,800 due to falling US bond yields, spurred by US inflation data released during the week. The fact that consumer and wholesale prices are showing signs of easing could deter the US Federal Reserve from tightening its monetary policy. At the time of writing, XAU/USD is trading at $1,794.49 a troy ounce.

US consumer sentiment rises while US inflation expectations are mixed

Global equities posted gains, reflecting improved risk appetite. At the time of writing, the University of Michigan Consumer Sentiment for August came in better than estimated, coming in at 55.1 vs. 52.5 expected, while one-year inflation expectations eased to 5%. from 5.2%, while for a five-year horizon they rose from 2.9% to 3.0%.

Joanne Hsu, director of the survey, said: “Despite this strength in the labor market and some signs of improvement in inflation, consumer sentiment remains very low by historical standards.”

Meanwhile, Fed spokespeople continued their campaign that they are not done tackling inflation, spearheaded by San Francisco Fed Mary Daly. During an interview with Bloomberg on Thursday, she said inflation is too high, even though consumer and producer prices indicate inflation is slowing. She favors a 50 basis point rate hike for the September meeting as a base case, but she does not take a 75 basis point off the table and would depend on the data. She downplayed recession fears and forecast the Federal Funds Rate (FFR) to stand at 3.4% by the end of the year.

For his part, Thomas Barkin, of the Richmond Fed, said that this week’s inflation data is “welcome”, but that he wants to see a sustained period under control. He added that more hikes are coming, while he said that he is undecided on the size of the rate hike.

The dollar index, a gauge of the dollar’s value against a basket of peers, rose 0.57% to 105.687, while the 10-year Treasury yield fell three basis points to 2.857%, which was a tailwind for gold prices.

On the other hand, tensions between the US and China regarding Taiwan eased throughout the day. However, the economic crisis in Europe may find another factor to take into account, since the Rhine River in Germany has exceeded its level of 40 cm, which would stop navigation on it

What to do

Next week, the US economic docket will include New York Fed manufacturing data, housing data, industrial production and retail sales.

Gold Price Forecast (XAU/USD): Technical Outlook

During the last week, XAU/USD prices consolidated in the range of $1,783 to $1,807. It is worth noting that despite lower US inflation data, which fueled lower US bond yields, gold was unable to break out of the range and push lower. the confluence of the 100 and 200 day EMA, around the $1,837-$1,842 zone.

If XAU/USD breaks above $1,807, traders could expect gold to test this last zone. Otherwise, if the price of gold continues below $1,800, a move towards the 20-day EMA at $175.49 is expected.