Gold Price Forecast: XAU/USD rallies remain limited with bulls capped below $4,050

Gold (XAU/USD) is showing a shallow recovery attempt on Wednesday, with bulls struggling to consolidate above $4.050 during the European session, leaving bears in control after the impulsive reversal from the $4,150 resistance area on Tuesday. Precious metals remain vulnerable on Wednesday, as the US Dollar (USD) rallies across the board, boosted by rising hopes of a Federal Reserve (Fed) interest rate hike in December and with Oil prices picking up from lows.

Data from the US released on Tuesday revealed that consumer inflation grew beyond expectations in October, bolstering the case for another Fed tightening move in December and providing a fresh boost to a hitherto soft US Dollar.

Comments from the US central bank have endorsed that view earlier on Wednesday. The President of the Philadelphia Fed, Anna Paulson, called for a “further gradual tightening” to bring inflation to target, and somewhat later, Dallas Fed President Lorie Logan said that “it is clear that the Fed needs at least two more quarter-percentage-point increases,” fuelling the US Dollar further and weighing on precious metals.

Technical Analysis: Potential Double Top formation at the $4,150 area

XAU/USD trades at $4,050, still holding a near-term constructive bias from late October lows, although the bearish engulfing candle in the daily chart and a potential Double Top (DT) formation around $4,150 suggest that buyers are giving up. The Relative Strength Index on the 4-hour chart remains capped below the key 50 level, and the Moving Average Convergence Divergence (MACD) indicator holds in negative territory at -9.51, supporting the bearish view.

Immediate support lies between the November 6 and 10 lows at $4,030 and $4,023, respectively. A clear break below here would confirm the mentioned DT, adding pressure towards the November 2 and 3 highs, around $3,970. The DT's measured target lies around the November 3 low of $3,911.

On the upside, the intra-day high at $4,066 is closing the path towards a key resistance at the mentioned $4,150 area (November 5 and 9 highs.