Gold Price Forecast: XAUUSD moves away from multi-month highs, offered above $1,775

• Gold recovers to its highest level since mid-August amid the selling trend of the dollar.
• Less aggressive Fed rate hike bets and falling US bond yields weigh on the dollar.
• Softer-than-expected US PPI adds to the heavily-bid tone surrounding the dollar.
• A positive risk tone caps XAUUSD amid a slightly overbought RSI on the daily chart.

Gold continues its recent bull run and touches its highest level since mid-August around the $1,784-1,785 area on Tuesday. The XAUUSD maintains the bid tone during the early North American session, with the bulls now looking towards the recovery of the psychological signal of $1,800.

Following yesterday’s modest rebound, the US dollar is coming under further selling pressure, prolonging the inflation-inspired decline in US consumer spending. In fact, the dollar index, which measures the performance of the greenback against a basket of currencies, falls to a new three-month low and acts as a tailwind for dollar-denominated gold.

The US CPI report, released last week, indicates that the worst of the post-pandemic price rally is over and fuels speculation that the Federal Reserve will tighten less aggressively. This is evident from the continued decline in US Treasury yields, which continues to weigh on the dollar and offers additional support to underperforming gold.

Intraday selling of the US dollar picks up after the release of the US Producer Price Index (PPI), softer than expected. The US Bureau of Labor Statistics reported that the PPI declined to 8% year-on-year in October from 8.4% in September, missing expectations for a reading of 8.3%. Core PPI also missed estimates, slowing to 6.7% for the reported month from 7.2% in September.

However, the positive tone on risks and signs of a strong open in US equity markets prevent the safe-haven precious metal from rising further. Also, a slightly overbought RSI (14) on the daily chart prevents bulls from making further bets on gold. However, the fundamental background supports the prospects for further gains in the near term.

Therefore, any significant corrective pullback could continue to be seen as a buying opportunity and is more likely to remain limited, at least for now. Gold looks set to recapture the $1,800 signal, which coincides with a technically significant 200-day SMA. This, in turn, should act as a tipping point for the next leg of a directional move for the pair.

Technical levels to watch