Gold Price Forecast: Acceptance above 100/200-day SMAs favours XAU/USD bulls
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UNLOCK OFFER- Gold regained positive traction on Monday and inched back closer to multi-week tops.
- Rising inflation expectations, fresh COVID-19 jitters benefitted the safe-haven metal.
- A stronger USD, hawkish central bank outlooks kept a lid on any meaningful upside.
Gold caught some fresh bids on the first day of a new trading week and inched back closer to six-week tops touched on Friday. Expectations for a faster than expected rise in inflation continue acting as a tailwind for the XAU/USD, which is considered as a hedge against inflation. Meanwhile, the latest outbreak of COVID-19 infections in China has raised worries about the imposition of economically damaging lockdowns amid the country's zero-tolerance approach to the disease. Apart from this, concerns about a credit crunch in China's real estate sector overshadowed the dominant risk-on mood and extended additional support to the safe-haven precious metal.
Bulls further took cues from the overnight modest pullback in the US Treasury bond yields, which tends to benefit the non-yielding yellow metal. That said, a combination of factors contributed to keep a lid on any further gains for the commodity, rather prompted some selling during the Asian session on Tuesday. The US dollar staged a solid bounce from one-month lows and held traders from placing aggressive bullish bets around the dollar-denominated commodity. This, along with growing market acceptance about the prospects for an early policy tightening by major central banks, further contributed to cap the upside for gold prices.
The Fed Chair Jerome Powell reaffirmed on Friday that the US central bank will soon begin tapering its bond purchases. Investors also seem convinced that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. Adding to this, reports indicated that the Bank of Japan is discussing phasing out the COVID-19 loan program if infections in the country continue to dwindle. Moreover, the Bank of England officials have signalled about an imminent interest rate hike later this year. Hence, the key focus will be on the key central bank meetings in Canada, Japan and the Eurozone, which should infuse some volatility during the second half of the week.
In the meantime, traders will take cues from Tuesday's US economic docket, featuring the releases of the Conference Board's Consumer Confidence Index, Richmond Manufacturing Index and New Home Sales. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to gold. Apart from this, the broader market risk sentiment should allow traders to grab some short-term opportunities around the XAU/USD.
Technical outlook
From a technical perspective, acceptance above the 100/200-day SMAs confluence hurdle and a subsequent strength beyond the $1,800 mark favours bullish traders. However, repeated failures near the $1,812-14 intermediate hurdle warrant some caution before positioning for any further gains. Nevertheless, the bias remains tilted in favour of bullish traders and supports prospects for a move towards challenging the $1,832-34 heavy supply zone.
On the flip side, any meaningful pullback towards the technically significant moving averages confluence resistance breakpoint, around the $1,795-90 region, should be seen as a buying opportunity. This, in turn, should help limit the downside near the $1,782-81 horizontal support. Some follow-through selling will negate the positive outlook and drag gold prices back towards the $1,760 support zone. The downward trajectory could further get extended towards retesting monthly swing lows support, around the $1,750-45 region.
- Gold regained positive traction on Monday and inched back closer to multi-week tops.
- Rising inflation expectations, fresh COVID-19 jitters benefitted the safe-haven metal.
- A stronger USD, hawkish central bank outlooks kept a lid on any meaningful upside.
Gold caught some fresh bids on the first day of a new trading week and inched back closer to six-week tops touched on Friday. Expectations for a faster than expected rise in inflation continue acting as a tailwind for the XAU/USD, which is considered as a hedge against inflation. Meanwhile, the latest outbreak of COVID-19 infections in China has raised worries about the imposition of economically damaging lockdowns amid the country's zero-tolerance approach to the disease. Apart from this, concerns about a credit crunch in China's real estate sector overshadowed the dominant risk-on mood and extended additional support to the safe-haven precious metal.
Bulls further took cues from the overnight modest pullback in the US Treasury bond yields, which tends to benefit the non-yielding yellow metal. That said, a combination of factors contributed to keep a lid on any further gains for the commodity, rather prompted some selling during the Asian session on Tuesday. The US dollar staged a solid bounce from one-month lows and held traders from placing aggressive bullish bets around the dollar-denominated commodity. This, along with growing market acceptance about the prospects for an early policy tightening by major central banks, further contributed to cap the upside for gold prices.
The Fed Chair Jerome Powell reaffirmed on Friday that the US central bank will soon begin tapering its bond purchases. Investors also seem convinced that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. Adding to this, reports indicated that the Bank of Japan is discussing phasing out the COVID-19 loan program if infections in the country continue to dwindle. Moreover, the Bank of England officials have signalled about an imminent interest rate hike later this year. Hence, the key focus will be on the key central bank meetings in Canada, Japan and the Eurozone, which should infuse some volatility during the second half of the week.
In the meantime, traders will take cues from Tuesday's US economic docket, featuring the releases of the Conference Board's Consumer Confidence Index, Richmond Manufacturing Index and New Home Sales. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to gold. Apart from this, the broader market risk sentiment should allow traders to grab some short-term opportunities around the XAU/USD.
Technical outlook
From a technical perspective, acceptance above the 100/200-day SMAs confluence hurdle and a subsequent strength beyond the $1,800 mark favours bullish traders. However, repeated failures near the $1,812-14 intermediate hurdle warrant some caution before positioning for any further gains. Nevertheless, the bias remains tilted in favour of bullish traders and supports prospects for a move towards challenging the $1,832-34 heavy supply zone.
On the flip side, any meaningful pullback towards the technically significant moving averages confluence resistance breakpoint, around the $1,795-90 region, should be seen as a buying opportunity. This, in turn, should help limit the downside near the $1,782-81 horizontal support. Some follow-through selling will negate the positive outlook and drag gold prices back towards the $1,760 support zone. The downward trajectory could further get extended towards retesting monthly swing lows support, around the $1,750-45 region.
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