Gold Prices Retreat Amid Stronger US Dollar and Inflation Concerns

The gold price continues to decline for the second consecutive day, hovering near its monthly low. This drop is primarily attributed to increased US Dollar buying activity, diverting investment away from precious metals. The ongoing concerns about a potential recession are preventing more substantial losses for XAU/USD in anticipation of the upcoming US Consumer Price Index (CPI) release.

The surge in demand for the US Dollar, driven by recent price volatility, is a significant factor negatively impacting gold price. Expectations that the Federal Reserve will maintain its hawkish stance are boosting US Treasury bond yields, providing support for the US Dollar. Market participants are confident that the Fed will keep interest rates higher for an extended period, with some even pricing in the possibility of another 25-basis point rate increase by the end of the year.

Last week's positive US macroeconomic data, indicating a resilient economy, further reinforced these expectations. Additionally, the slower-than-expected decline in inflation levels supports the notion of future Fed policy tightening. Consequently, the focus is squarely on the upcoming release of the US Consumer Price Index (CPI), which will shape expectations regarding the Fed's future rate hikes and impact gold prices.

If the CPI data reveals persistent inflation, it could trigger a further rally in the US Dollar to a six-month high and continue to push gold prices lower. However, concerns about the deteriorating economic conditions in China and worries about rising borrowing costs are tempering investors' appetite for riskier assets, which may provide some support for the safe-haven XAU/USD.

Gold found support at the 1910 level, and a breakout of this support level will take the price toward 1900, followed by 1885.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1950	1942	1931	1910	1900	1885