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  • US CPI report suggested a slower than expected rise in US inflation.
  • On Wednesday, the gold price forecast remains bullish above an immediate psychological support level of 1,800.   
  • Forex trading market participants may buy above the $1,793 level to target the $1,801.

Gold prices were closed at $1805.65 after reaching a high of $1810.65 and a low of $1783.35. Gold rebounded on Tuesday and gathered strength against the US dollar after disappointed investors’ long-awaited US CPI data. On Wednesday, the gold price forecast remains bullish above an immediate psychological support level of 1,800.   

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Bureau of Labor Statistics Reports CPI m/m

Gold hit a one-week high level on Tuesday after the CPI report suggested a slower than expected rise in US inflation. It added to the uncertainty over the US Federal Reserve’s timeline to taper monetary stimulus. Some analysts believed that the reading alleviated some concerns about runaway inflation. Moreover, it validated the Fed’s assertion that the high price pressures seen since the beginning of the year would subside by the fourth quarter.

Quick Economic Data Review

On the data front, at 15:00 GMT, the NFIB Small Business Index surged in August to 100.1 against the predicted 99.0. It supported the US dollar and further capped gains in gold prices. 

The CPI in August dropped to 0.3% against the forecasted 0.4%, weighed on the US dollar, and added further gains in precious metals. In August, the Core CPI also dropped to 0.1% against the projected 0.3. Thus, it weighed on the US dollar and pushed gold prices even further on the upside.

The inflation data could also mean that the Fed might slow unwinding economic support measures and keep interest rates low. This could be good news for precious metals because it means the Fed will be less likely to announce tapering economic support at its September meeting.

Fed Tapering Concerns Support the Dollar

The Fed’s stimulus programme and lower interest rates have kept price pressures in the US higher for a long time. The $120 billion in bond purchases since March 2020 and near-zero interest rates for the past 18 months have been weighing on the US dollar and pushing gold prices to stay near the $1800 level.

In 2020, the US economy declined by 3.5% amid the business shutdowns owing to the coronavirus pandemic. However, in the second quarter of 2021, the US economy showed an expansion of 6.5%, which was in line with the forecasts of the Federal Reserve. 

The growing optimism that the economic recovery was gaining traction fueled expectations that the Fed would soon begin tapering economic support. But some inflation and employment reports suggest a delay in such a decision by the Fed, which is keeping gold higher these days.

Gold Price Forecast
XAU/USD Daily Chart

Gold Price Forecast – Daily Support and Resistance

Support Resistance

1786.41 1801.36

1778.28 1808.18

1771.46 1816.31

Pivot Point: 1793.23

Gold Price Forecast – Descending Triangle Breakout at 1,796

On Wednesday, the gold price forecast remains bullish above an immediate psychological support level of 1,800. On the 4 hour timeframe, gold faces immediate resistance at the 1,808 level, and a bullish crossover of this level could extend the buying trend until the 1,816 level.

Gold’s immediate support stays at the 1,796 level, which is being extended by 50 days EMA (exponential moving average). The crossover below the 50 EMA is likely to extend the selling trend until the 1,783 level.

Previously, gold had violated a descending triangle pattern at the 1,792 level, and this breakout has extended a strong buying trend until the 1,808 level. At the moment, we can expect a slight bearish correction in gold prices; breaking out of the 1,800 level could trigger a strong selling friend in the precious metal.

A bullish breakout of the 1,796 level will likely extend a buying trend until the next resistance level of 1,801. Moreover, a further bullish breakout of the 1,801 level exposes gold prices towards the next resistance level of the 1,815 level. Moreover, the leading indicator, Stochastic RSI, has entered the overbought zone. It means the precious metal can exhibit a bearish correction upon a breakout of 1,800 support levels. 

Therefore, Forex trading market participants may buy above the $1,793 level to target the $1,801. Alternatively, traders can take a sell position below the $1,800 level today. All the best!

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