Gold Price Forecast: $1,800 might continue to cap ahead of FOMC on Wednesday
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UNLOCK OFFER- A pickup in the US bond yields dragged gold lower for the second straight session on Friday.
- Sustained USD selling bias assisted the metal to regain traction on the first day of a new week.
- Investors eye US Durable Goods Orders for some impetus ahead of the FOMC policy meeting.
Gold witnessed an intraday turnaround from the vicinity of the $1,800 mark and finally settled in the red for the second consecutive session on Friday. Upbeat US economic data was enough to push the US bond yields higher, which turned out to be a key factor that drove flows away from the non-yielding yellow metal. The US Census Bureau reported that New Home Sales rose at a seasonally-adjusted annual rate of 1.021 million in March – the fastest pace since 2006. Adding to this, the IHS Markit revealed that the economic activity in the US private sector expanded at a record pace in April. This comes amid a generally positive tone around the equity markets that exerted some additional downward pressure on the safe-haven XAU/USD.
The negative factors, to a larger extent, were offset by the prevalent US dollar selling bias, which continues to be weighed down by diminishing odds for an earlier than anticipated Fed lift-off. Investors now seem convinced with the view that any spike in inflation is likely to be transitory and that the Fed will keep interest rates lower for a longer period. This, in turn, extended some support to the dollar-denominated commodity and helped limit any deeper losses, rather assisted to regain some positive traction on the first day of a new trading week. That said, the upside is likely to remain capped as investors might prefer to wait on the sidelines ahead of the latest FOMC monetary policy update, scheduled to be announced on Wednesday.
In the meantime, Monday's release of the US Durable Goods Orders might influence the USD price dynamics and provide some impetus later during the early North American session. Apart from this, the US bond yields and the broader market risk sentiment might also contribute to produce some meaningful opportunities around the XAU/USD.
Short-term technical outlook
From a technical perspective, gold formed a bullish double-bottom in March and has been gradually recovering since then. A subsequent move back above the $1,760-65 resistance validated the bullish chart pattern, though repeated failures near the $1,800 mark warrant some caution before positioning for any further appreciating move. Hence, it will be prudent to wait for a sustained move beyond mentioned handle before placing fresh bullish bets. The commodity might then accelerate the move towards the $1,815-16 resistance, marking the 50% Fibonacci level of the $1,959-$1,676 downfall. Some follow-through buying will set the stage for an extension of the upward momentum towards the 61.8% Fibo. level, around the $1,852-55 region, en-route the $1,874-75 supply zone.
On the flip side, the double-bottom neckline resistance breakpoint, around the $1,765-60 region now seems to protect the immediate downside. This is followed by the 23.6% Fibo. level, around the $1,745-44 area and the $1,730 level, which if broken decisively might negate the positive outlook. The XAU/USD might then turn vulnerable and accelerate the fall towards challenging the $1,700 round-figure mark. The downward trajectory could further get extended and expose the double-bottom support, around the $1,677-76 region, or multi-month lows touched in March.
- A pickup in the US bond yields dragged gold lower for the second straight session on Friday.
- Sustained USD selling bias assisted the metal to regain traction on the first day of a new week.
- Investors eye US Durable Goods Orders for some impetus ahead of the FOMC policy meeting.
Gold witnessed an intraday turnaround from the vicinity of the $1,800 mark and finally settled in the red for the second consecutive session on Friday. Upbeat US economic data was enough to push the US bond yields higher, which turned out to be a key factor that drove flows away from the non-yielding yellow metal. The US Census Bureau reported that New Home Sales rose at a seasonally-adjusted annual rate of 1.021 million in March – the fastest pace since 2006. Adding to this, the IHS Markit revealed that the economic activity in the US private sector expanded at a record pace in April. This comes amid a generally positive tone around the equity markets that exerted some additional downward pressure on the safe-haven XAU/USD.
The negative factors, to a larger extent, were offset by the prevalent US dollar selling bias, which continues to be weighed down by diminishing odds for an earlier than anticipated Fed lift-off. Investors now seem convinced with the view that any spike in inflation is likely to be transitory and that the Fed will keep interest rates lower for a longer period. This, in turn, extended some support to the dollar-denominated commodity and helped limit any deeper losses, rather assisted to regain some positive traction on the first day of a new trading week. That said, the upside is likely to remain capped as investors might prefer to wait on the sidelines ahead of the latest FOMC monetary policy update, scheduled to be announced on Wednesday.
In the meantime, Monday's release of the US Durable Goods Orders might influence the USD price dynamics and provide some impetus later during the early North American session. Apart from this, the US bond yields and the broader market risk sentiment might also contribute to produce some meaningful opportunities around the XAU/USD.
Short-term technical outlook
From a technical perspective, gold formed a bullish double-bottom in March and has been gradually recovering since then. A subsequent move back above the $1,760-65 resistance validated the bullish chart pattern, though repeated failures near the $1,800 mark warrant some caution before positioning for any further appreciating move. Hence, it will be prudent to wait for a sustained move beyond mentioned handle before placing fresh bullish bets. The commodity might then accelerate the move towards the $1,815-16 resistance, marking the 50% Fibonacci level of the $1,959-$1,676 downfall. Some follow-through buying will set the stage for an extension of the upward momentum towards the 61.8% Fibo. level, around the $1,852-55 region, en-route the $1,874-75 supply zone.
On the flip side, the double-bottom neckline resistance breakpoint, around the $1,765-60 region now seems to protect the immediate downside. This is followed by the 23.6% Fibo. level, around the $1,745-44 area and the $1,730 level, which if broken decisively might negate the positive outlook. The XAU/USD might then turn vulnerable and accelerate the fall towards challenging the $1,700 round-figure mark. The downward trajectory could further get extended and expose the double-bottom support, around the $1,677-76 region, or multi-month lows touched in March.
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