• Gold price touches a fresh multi-month high following the release of the US inflation figures.
• The crucial US CPI report cements bets for smaller Fed rate hikes and boosts the XAU/USD.
• The risk-on impulse might hold back bulls from placing fresh bets and cap gains for the metal.

Gold price reverses an early North American session dip to the $1,873 area and jumps to a fresh eight-month high following the release of the US consumer inflation figures. The XAU/USD is currently placed just below the $1,900 mark, up over 1.0% for the day, and seems poised to appreciate further.

The US Dollar bounces off a seven-month low in reaction to mostly in-line US Consumer Price Index (CPI) data, which, in turn, acts as a headwind for the dollar-denominated Gold price. The US Bureau of Labor Statistics reported that the headline US CPI declined 0.1% in December as compared to estimates for a flat reading. The yearly rate, however, matched expectations and decelerated to 6.3% from 7.1% in November. Furthermore, core inflation, which excludes food and energy prices, edge up by 0.3% in December and fell to 5.7% on yearly basis from 6.0% in November.

The mixed data, meanwhile, reaffirms market expectations for a less aggressive policy tightening by the Federal Reserve (Fed) and keeps the US Treasury bond yields depressed. In fact, the yield on the benchmark 10-year US Treasury note languishes near a multi-week low amid rising bets for smaller Fed rate hikes going further. This, in turn, caps the attempted USD recovery and provides a fresh lift to the non-yielding Gold price. That said, a generally positive tone around the equity markets might turn out to be the only factor capping gains for the safe-haven XAU/USD.

Nevertheless, the fundamental backdrop remains tilted firmly in favour of bullish traders. The positive outlook is reinforced by the emergence of some dip-buying in the last hour. This, in turn, supports prospects for a further near-term appreciating move for the Gold price, though it will be prudent to wait for a sustained strength beyond the $1,900 mark before placing fresh bullish bets.

Technical levels to watch