GOLD PRICE FORECAST: XAU/USD CONSOLIDATES ABOVE THE 20-DAY SMA AHEAD OF US CPI

XAU/USD rose past the $1,930 level on Tuesday, piercing through the 20-day SMA at $1,926.

Markets expect headline CPI to drop to 3.1% YoY in June and the Core to 5%.

Declining US yields favour Gold prices.

On Tuesday, the Gold spot XAU/USD gained ground and consolidated above the 20-day Simple Moving Average (SMA)  for the first time since May. Ahead of key US Consumer Price Index (CPI) figures on Wednesday, US yields are declining giving room to the non-yielding metal to advance.

US CPI figures to define Fed’s next steps

On Wednesday’s session, the US Bureau of Labor Statistics will release CPI data from June. The headline figure is expected to fall to 3.1% YoY from the previous 4% and the Core measure to 5% from 5.3%. Meanwhile, the US Treasury bond yields, which could be seen as the opportunity cost of holding gold, trade weak, with the 2-year standing at 4.86% and the 5 and 10-year yields falling to 4.22% and 3.96%, respectively.

That being said, hawkish bets on the Federal Reserve (Fed) remain steady. According to the FedWatch tool, investors have already priced in a 25 basis point (bps) hike in the next Fed July meeting and looking forward, they discount a 35% probability of another 25 bps in 2023. However, CPI figures may impact those expectations affecting both the US bond market and the yellow metal price dynamics.

XAU/USD Levels to watch

The daily chart suggests that the buyers have taken the lead over the sellers in the short term after conquering the 20-day SMA. However, the bulls still have some work to do to confirm the positive bias and need to retake the 100-day SMA, currently at $1,950. Meanwhile, the Relative Strength Index (RSI) points north, still below its midline, while the Moving Average Convergence Divergence (MACD) prints higher green bars.

Resistance levels: $1,940, 1,950 (100-day SMA), $1,970.

Support levels: $1,915, $1,900, $1,890.