Gold Price Forecast: XAU/USD losses traction, down below $1650 as US bond yields recover

• Gold price extended its weekly losses by 2.8%, below $1650.
• US data reported that retail sales disappointed while consumer sentiment improved.
• XAU/USD Price Forecast: The break below $1660 opened the door for a test of the weekly low at $1642.49.

Gold price extends its losses, while the greenback recovered some ground following Thursday’s US inflation report, which will keep the Fed’s pedal to the metal as traders brace for big rate hikes in November and December FOMC’s meetings. The XAU/USD is trading at $1646 a troy ounce after hitting a daily high of $1671.

XAU/USD tumbles as the US dollar strengthens, underpinned by high US T-bond yields

US equity indices opened in the red, portraying a negative sentiment. US Retail Sales showed consumers are beginning to feel the shock of higher interest rates, with September’s sales decelerating from 0.3% to 0% MoM, below expectations, and slowed by 8.41% annually. Of late, the University of Michigan Consumer Sentiment edged higher to 59.8, exceeding estimates but inflation expectations for one year rose to 5.1%, above forecasts of 4.7%.

Meanwhile, a slew of Fed policymakers are crossing newswires, led by Fed’s George, Daly, and Cook. The Kansas City Fed, Esther Goerge, said that the only piece of clear data is that inflation is high in the US. She echoed previous commentaries of her colleagues, saying that the rates need to get into restrictive territory, though she’s not clear on where rates will peak.

Later the San Francisco Fed Mary Daly said that inflation is not cooling, while today’s retail sales flashed some signs of easing. She reiterated what Fed’s George expressed the need to get policy restrictive and foresees the Federal funds rate (FFR) to peak at around 4.5%-5%.

At the same time, one of the Fed’s new members Lisa Cook, repeated some of its last week’s speech, saying that inflation remains “stubbornly and unacceptably high” and added that she does not want a “stop and go” policy.

Given the backdrop, XAU/USD ignored most Fed officials’ comments, hovering just below $1650. US Treasury bond yields, namely the 10-year, edge up three and a half bps, at 3.987%, capping the recovery of the yellow metal.

What to watch

Next week, the US economic docket will feature the NY Empire State Manufacturing Index, the Philadelphia Fed Index, Industrial Production, and unemployment claims. Additionally, Fed speakers will continue to dominate the headlines.

XAU/USD Price Forecast

XAU/USD’s consolidated during the week around the $1660-80 range until Thursday when it dived toward the weekly low of $1642.49. nevertheless, trimmed losses and closes within the previously mentioned range. On Friday, XAU/USD has decisively broken below the range after facing solid resistance at the 20-day EMA, opening the door for a weekly low test, which, once cleared, could send XAU/USD sliding towards the September 28 low of $1614.92.