Gold Price Forecast: XAU/USD bulls likely to stay on the sidelines, focus remains on FOMC
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UNLOCK OFFER- Rising geopolitical tensions assisted the safe-haven gold to regain positive traction on Monday.
- The risk-on impulse, rebounding US bond yields, hawkish Fed expectations capped the upside.
- Investors might also refrain from placing aggressive bets ahead of the FOMC policy meeting.
Gold attracted some dip-buying on the first day of a new week and reversed a major part of the previous week's pullback from a two-month high. Geopolitical tensions between Russia and Ukraine as well as in the Middle East turned out to be a key factor that acted as a tailwind for the safe-haven precious metal. In the latest development, the US State Department ordered the families of all American staff at the US Embassy in Ukraine to leave the country amid concerns about a possible Russian attack.
Moreover, The New York Times reported President Joe Biden was considering sending thousands of US troops to NATO allies in Europe along with warships and aircraft. Adding to this, British Deputy Prime Minister Dominic Raab warned that Russia faces severe economic sanctions if it installs a puppet regime in Ukraine. Separately, the United Arab Emirates grounded most private drones and light sports aircraft for a month following a deadly drone and missile attack on Abu Dhabi by Yemen's Houthis last Monday.
That said, any meaningful upside seems elusive amid a positive tone around the equity markets and expectations that the Fed will tighten its policy at a faster pace than anticipated. Investors seem convinced that the Fed would begin raising interest rates in March to combat high inflation and have been pricing in a total of four hikes in 2022. This, along with a goodish rebound in the US Treasury bond yields, should cap gains for the non-yielding yellow metal ahead of a two-day FOMC meeting starting Tuesday.
In the meantime, traders on Monday will take cues from the release of the flash US PMI prints (Manufacturing and Services), due later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to gold prices. Apart from this, the broader market risk sentiment will be looked upon to grab some short-term trading opportunities around the XAU/USD.
Technical outlook
From a technical perspective, gold showed some resilience below the $1,830 resistance-turned-support and the subsequent strength favours bullish traders. That said, any further move up is likely to confront resistance near last week’s swing high, around the $1,848 region. The next relevant hurdle is pegged near a downward sloping trend-line extending from June 2021 swing high, currently around the $1,860 region. A convincing breakthrough would be seen as a fresh trigger for bullish traders and pave the way for an extension of the recent move up witnessed over the past one month or so.
On the flip side, the $1,830-$1,828 zone might continue to act as immediate support, which if broken might prompt some technical selling and accelerate the fall towards the $1,812 horizontal zone. This is followed by the very important 200-day SMA, currently around the $1,805 region, ahead of the $1,800 round figure. Some follow-through selling below an upward sloping trend-line support, extending from the August 2021 swing low, currently around the $1,794 region, will negate any positive bias and turn gold vulnerable.
- Rising geopolitical tensions assisted the safe-haven gold to regain positive traction on Monday.
- The risk-on impulse, rebounding US bond yields, hawkish Fed expectations capped the upside.
- Investors might also refrain from placing aggressive bets ahead of the FOMC policy meeting.
Gold attracted some dip-buying on the first day of a new week and reversed a major part of the previous week's pullback from a two-month high. Geopolitical tensions between Russia and Ukraine as well as in the Middle East turned out to be a key factor that acted as a tailwind for the safe-haven precious metal. In the latest development, the US State Department ordered the families of all American staff at the US Embassy in Ukraine to leave the country amid concerns about a possible Russian attack.
Moreover, The New York Times reported President Joe Biden was considering sending thousands of US troops to NATO allies in Europe along with warships and aircraft. Adding to this, British Deputy Prime Minister Dominic Raab warned that Russia faces severe economic sanctions if it installs a puppet regime in Ukraine. Separately, the United Arab Emirates grounded most private drones and light sports aircraft for a month following a deadly drone and missile attack on Abu Dhabi by Yemen's Houthis last Monday.
That said, any meaningful upside seems elusive amid a positive tone around the equity markets and expectations that the Fed will tighten its policy at a faster pace than anticipated. Investors seem convinced that the Fed would begin raising interest rates in March to combat high inflation and have been pricing in a total of four hikes in 2022. This, along with a goodish rebound in the US Treasury bond yields, should cap gains for the non-yielding yellow metal ahead of a two-day FOMC meeting starting Tuesday.
In the meantime, traders on Monday will take cues from the release of the flash US PMI prints (Manufacturing and Services), due later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to gold prices. Apart from this, the broader market risk sentiment will be looked upon to grab some short-term trading opportunities around the XAU/USD.
Technical outlook
From a technical perspective, gold showed some resilience below the $1,830 resistance-turned-support and the subsequent strength favours bullish traders. That said, any further move up is likely to confront resistance near last week’s swing high, around the $1,848 region. The next relevant hurdle is pegged near a downward sloping trend-line extending from June 2021 swing high, currently around the $1,860 region. A convincing breakthrough would be seen as a fresh trigger for bullish traders and pave the way for an extension of the recent move up witnessed over the past one month or so.
On the flip side, the $1,830-$1,828 zone might continue to act as immediate support, which if broken might prompt some technical selling and accelerate the fall towards the $1,812 horizontal zone. This is followed by the very important 200-day SMA, currently around the $1,805 region, ahead of the $1,800 round figure. Some follow-through selling below an upward sloping trend-line support, extending from the August 2021 swing low, currently around the $1,794 region, will negate any positive bias and turn gold vulnerable.
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